Category Archives: Economy

Sully, Obama and Polanyi

A few months ago I was doing some reading for class about the Industrial Revolution and I saw a book on the reading list that I’d heard of before but couldn’t remember why. I took it down and read a few chapters and my mind totally blown by its description of the rise of capitalist social relations and the accompanying social dislocation in Europe. The book is called The Great Transformation and it was written during World War II by Karl Polanyi, a Jewish Hungarian émigré.

Polanyi saw the great catastrophes of the first half of the Twentieth Century (WWI, WWII and the Holocaust) as products of the “disembedding” of the market from society that took place with the rise of capitalism, which he argues was an intentional change instituted by the state. The most famous line is “laissez-faire was planned.” (David Graeber’s much feted Debt: The First 5000 Years reminded me, in its own way, of Polanyi.)

The second half of The Great Transformation focuses on Polanyi’s prescriptions for dealing with the disembedding, which is to create a kind of socialist society that provides basic protections for people. Indeed, many argue, most famously the political economist John Ruggie, that this is precisely what happened in the capitalist world after the end of WWII with the rise of welfare state policies, in particular in Europe but also to an extent in the United States. Ruggie calls that the era of “embedded liberalism.” After the 1980s, with the expansion of capitalist globalization and the growth of international financial markets, there was again a kind of “disembedding,” which has gotten us to where we are now.

I’ve thought about Polanyi’s analysis a lot since then. Reading a recent blog post by, of all people, Andrew Sullivan brought Polanyi up again.

Capitalism is in this sense anti-conservative. It is a disruptive, culturally revolutionary force through human society. It has changed the world in three centuries more than at any time in the two hundred millennia that humans have lived on the earth. This must leave – and has surely left – victims behind. Which is why the welfare state emerged. The sheer cruelty of the market, the way it dispenses brutally with inefficiency (i.e. human beings and their jobs), the manner in which it encourages constant travel and communication: these, as Bell noted, are not ways to strengthen existing social norms, buttress the family, allow the civil society to do what it once did: take care of people within smaller familial units according to generational justice and respect. That kind of social order – the ultimate conservative utopia – is inimical to the capitalist enterprise.

Sullivan casts his argument in the relation to that of the sociologist Daniel Bell (whom I haven’t read) but it falls just as much in the tradition of Karl Polanyi’s work on “the Great Transformation” and the subsequent writing of political economists like John Ruggie on what they called the post-war “embedded liberal” compromise. Sullivan continues:

One reason, I think, that Obama’s move toward a slightly more effective welfare state has not met strong resistance – and is clearly winning the American argument – is that the sheer force of this global capitalism is coming to bear down on America more fiercely than ever before. People know this and they look for some kind of security. In other words, it is precisely capitalism’s post-1980s triumph that has helped create the social dependency so many conservatives bemoan today.

Sullivan, who still likes to stick to his weird hybrid “conservatism,” traces the breakdown of “conservative” social values to the socio-economic dislocation, but that’s beside the point, really. Is the welfare state seeing a comeback? That might seem ironic considering the widespread push for austerity in the advanced capitalist countries (see the Osborne’s Britain, Merkel’s Greece, sequestration’s America). But considering the dislocation that the great deleveraging is causing, it might be possible. Obama’s State of the Union, far from laying out a radical Keynesian agenda, still seemed to offer some kind of pushback against the Reagan-era “disembedding.” As the New York Times wrote of the speech:

But Mr. Obama has always looked admiringly at Reagan’s success in shifting the nation’s ideological center of gravity in an enduring way that transcended the issues of the moment. While no fan of Reagan’s policies, he credited him during the 2008 campaign with changing “the trajectory of America in a way that, you know, Richard Nixon did not and in a way Bill Clinton did not.”

To achieve that level of influence before he leaves the White House will require not only that he enact an ambitious legislative agenda in the next year or two but also that he provide — and sell to voters beyond his base — a compelling alternative to the conservative mantra that nearly all problems can be traced back to excess government.

As the Times rightly notes, this will require a major ideational shift in America. But there’s reason to believe it might be happening.

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Turkey: Islamist hotbed, economic powerhouse, East vs. West, Ottoman Empire

The Turkish expansion continues, back to furthest edges of the old Ottoman Empire:

Kuwait’s Foreign Minister Sheikh Mohammad al-Sabah, whose country holds the rotating presidency of the six-nation Gulf Cooperation Council (GCC) alliance, said trade between the two sides has been growing rapidly.

[…]

In 2008, GCC exports to Turkey rose five times over the previous year and their imports from Ankara increased a massive 15-fold, the Kuwaiti minister said.

And all this just after meetings a few weeks ago between Turkish and Syrian cabinet members to discuss issues from Kurds to free trade. For a smart take on Turkey’s economic and diplomatic expansion take a look at James Traub’s recent piece in Foreign Policy, which while it doesn’t avoid all of the Turkey cliches (then again, neither did I in this 200 word blog post), manages to do a smart and pretty unbiased take on developments in Turkish foreign and economic policy.

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Neoliberalism’s success in Egypt

This piece in the Guardian’s Comment Is Free has made its way across my Twitter, blogroll, and Google Alerts over the past couple days. It refers to a report by the Egyptian government’s investment authority assessing the success of Egypt’s economic liberalization. Here’s the gist:

Since 1991, the year Egypt yoked itself to an IMF structural adjustment programme and embarked on a series of wide-ranging economic reforms, the country has been something of a poster child for neoliberal economists who point to its remarkable levels of annual GDP growth as proof that “Washington consensus” blueprints for the developing world can work. Coming on the back of an economic crisis precipitated partly by profligate government spending on arms sales (subsidised by US aid), the regime of President Hosni Mubarak signed up to an IMF loan that was conditional on economic liberalisation. Those conditions – relaxed price controls, reduced subsidies, an opening up of trade – were met with gleeful abandon.

[…]

Then 2004 brought a new cabinet which swiftly cut the top rate of tax from 42% to 20%, leaving multimillionaires paying exactly the same proportion of their income into government coffers as those on an annual salary of less than £500. Special economic zones were created, foreign investment reached dizzying heights ($13bn in 2008) and, in the past three years, economic growth has clocked in at a consistently high 7%. The minimum wage, incidentally, has remained fixed at less than £4 a month throughout. The global business community applauded Mubarak’s rule as “bold”, “impressive” and “prudent”.

So Egypt is now a glitzier, more prosperous land with pharaonic-style riches to match its pharaonic-style leader (now entering his 29th year in power). Except, as the GAFI report inconveniently points out, 90% of the country has yet to see any of the bounty. Foreign investment has been largely channelled into sectors like finance and gas which create few new jobs. While national resources like natural gas have been sold at subsidised rates to the tycoon owners of iron and fertiliser factories, the cost of ordinary commodities like bread and cooking oil has spiralled. In fact since the IMF began hauling Egypt’s economy into modernity, Egyptians have got steadily and dramatically poorer: when structural adjustment began 20% of the population were living on less than (inflation-adjusted) $2 a day; today, that figure stands at 44%. In the past decade, when GDP growth was at its strongest, absolute poverty has climbed from 16.7% to almost 20%. Chomsky called neoliberalism “capitalism with the gloves off”; it’s hard, looking at this jumble of statistics, to discern anything but a shameless hit-and-run job perpetrated by a tiny band of Egypt’s business elite.

I’m going to be quite honest and say that I don’t know anything about economics. (In fact, as I’ve said before I’m pretty bad with money in general.) But this article points out what seems to be the glaring truth about economic liberalization in the developing world: GDP growth has very little to do with eliminating poverty. India, which is widely hailed as globalization’s greatest success story, seems like an even better example Egypt.

This is not to say that I’m completely in favor of a state-run economy. That, too, has its downfalls. But as Shenker points out in the Guadian, the current way of doing business benefits only a few.

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Food subsidies

Al-Jazeera English did a good piece on food subsidies in Egypt–always an important issue. It doesn’t say that food subsidies will be phased out, but seems to suggest it’s a possibility.

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Number games

An Indian economist named Sundeep Waslekar has published a study that calculates the price tag of the Israeli-Palestinian conflict from 1991 to 2008.  Their total is $12 trillion.

You can buy the study for $40 from the Strategic Foresight Group here, if you want to.  Luckily, Tom Dine at the Israel Policy Forum has read the paper and summarizes many of the most interesting points.  Allow me to condense his summary:

From the second intifada through 2007, there were 4,546 Palestinian fatalities, 650 of them caused by the Hamas-Fatah fighting.  More than 11,000 Palestinians have been detained.  In 1998, 420,241 out of 3,000,000 Palestinians lived below the poverty line; it was 820,000 in 2005.

..

Because of both the Israeli occupation and the power struggle within the two Palestinian entities the educational system has severely suffered, unemployment and joblessness are quite high; time wasted because of checkpoints amounts to 120 million man-hours.  Deaths due to delay in medical treatment came to 51 Palestinians between 2000-2007.

..

[Israeli] Children killed, for instance, since the al-Aqsa initifida of September 29, 2000, until today are close to 90.

..

If peace were to break out, the study claims Israel’s peace dividend would be an annualized $9.1 billion, amounting per household to $4,423 per year for five years.  The peace dividend for the new Palestine is not calculated.  However, both states would benefit from not only cheaper oil and gas imports and the free flow of goods, but vast amounts of Sinai groundwater would be exploited, resulting in a surge in agricultural production in Gaza, the Negev, and West Bank.

I understand the idea of opportunity cost, but I have to say that I am a little skeptical of anything that puts a price tag on dead children.  It’s obvious that the Israeli-Palestinian conflict economically inefficient.  I guess $12,000,000,000,000 makes sense.

UPDATE:  After doing some thinking and some Googling, I’ve started to think that $12 trillion might be a low estimate.  According to a January 2008 report from the Congressional Research Service (careful, it’s a PDF) the US gives about $3 billion in aid to Israel a year.  Washington also gives a much smaller, though still significant amount of aid to the Palestinian Territories.  That would come out to about $50 billion over the time period discussed in the Strategic Foresight Group’s study.

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BRIC City

My new favorite news source, Global Post, has an interesting story about the rising economic powers, the BRICs.  (That stands for Brazil, Russia, India and China for those of you who don’t care for the kinds of silly acronyms to which comparative politics professors and Thomas Friedman are prone.)

So despite the ongoing global financial crisis — which, to be sure, has damaged these high-flyers too — the BRICs have most definitely arrived. And, yes, they are here to stay.

That point has been reinforced again and again in recent days and weeks. And one thing is clear whether it’s spoken in Mandarin, Russian, Hindi or Portuguese: the BRICs want a bigger say in how to manage the global economy.

Two weeks ago at the G20 finance minister’s meeting in Horsham, England the BRIC countries — for the first time — released their own communique on how the global economic crisis should be managed. In it, they called for a bigger voice.

It makes sense that these countries want a bigger role in the global economy.  They are important.  Then, later today, I saw a headline on Drudge Report that said “Brazil president blames white people for economic crisis…

President Lula:

“This crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.”

He added: “I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.”

You know, you can’t argue with facts.

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Time to bust heads

I won’t pretend to be an expert on economics.  My plans for an economic recovery package would probably be something along the lines of, “Dude.  Give away so much money and then it will be cool.”  But while I may not understand how a stimulus is supposed to work, I know enough about American politics to see when one party is being held hostage by another.  And that’s what’s happening with this stimulus bill.

Jonathan Zasloff at Reality Based Community (an excellent blog if you haven’t seen it) lays out what President Obama and the Democratic leadership need to do to stop getting jerked around by the party of losers:

The administration should use its supposed vaunted community organizing to build public pressure for its version of the stimulus, and then Obama, Pelosi, and Reid should hold a press conference where they say:

1) The only reason why the bill has not passed and Americans have not gotten economic relief is because of the Republican Party. And the only reason why the Republican Party has been able to obstruct is because of the filibuster (more accurately, Senate rules, but close enough.).

2) If the stimulus does not pass now, any future economic pain is solely the responsibility of the Republican Party. Any American who finds herself out of work, without medical care, etc. etc. can lay blame completely at the doorstep of the GOP.

3) Budget bills cannot be filibustered.

4) Thus, our intention is to pull the stimulus package now and resubmit it as part of the budget process. We will resubmit this budget with Democratic priorities and Democratic principles, and it will reinforce the goals that President Obama advocated during the campaign and for which the country gave him a mandate.

5) It will pass in that form.

6) To be sure, it will be much better to have a package now, but we will not compromise on what the American people voted for last November. And as we said, the public knows quite clearly upon whom the blame should land.

7) Negotiations are over. Take it or leave it.

Barack Obama cut his political teeth in Chicago. Nancy Pelosi learned tough Baltimore politics from her father. Harry Reid used to be a boxer. It’s about time they showed it.

Right on.  WWOLD?

This guy could get the stimulus passed

This guy could get the stimulus passed

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Filed under American Politics, Economy