John Quiggin

… is set out over the fold. I’m confident readers who take a little time to think about it will realise it’s far superior to existing policy, and to any alternative proposed so far.

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A bunch of standard measures of US economic wellbeing (median household income, real wages for workers with high school education, educational attainment by age 25 and so on) show strong improvement from 1945 to the early 1970s, followed by stagnation or very slow growth thereafter. A variety of arguments, have been put forward to suggest that the standard statistical measures understate improvements in wages, incomes and so on since the 1970s. Some of these arguments are valid (for example household size has fallen), some not (for example, the fact that we now have more of goods that have become relatively cheaper). Regardless of validity, the main reason people believe these arguments is that, for anyone who was around at the time, it seems implausible that our parents’ living standards in the 1970s were comparable to our own today (assuming roughly similar class positions)

This reasoning is invalid for a reason that should be familiar to those on the conservative side of debates over inequality. The measures mentioned above compare snapshots of incomes at different times. But (as conservatives regularly point out) standards of living are determined mainly by lifetime incomes, not by income in any particular year. Given the pattern described above, lifetime income for someone who worked, say, from 1940 to 1985 was well below that for someone in a similar class position who started work in 1970, just when the long increase in real wages was slowing for most and stopping for some. For every year of their working life, the 1970 starter gets a wage (adjusted for age, education and so on) that’s as high as the maximum attained by the 1940 starter after 30 years of steady growth. Unsurprisingly, that translates into a bigger house, and more of most items that require savings, whether or not their price has risen relative to the CPI.

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The latest data on US incomes make for grim reading, both as regards the bottom of the income distribution where the number in (absolute) poverty is at an all-time high (the proportion of the population was the highest since 1993), and in the middle, where median household incomes have fallen back to the 1997 level. For some groups, such as male wage earners without college education, real incomes haven’t risen since around 1970

Having discussed this issue before I’m familiar with most of the standard arguments[1] used to show that things really aren’t that bad. The big ones are
(i) household size is decreasing
(ii) the consumer price index doesn’t take adequate account of product quality
(iii) the Earned Income Tax Credit isn’t taken into account
(iv) health insurance and other benefits are undervalue

Looking at the period from 1970 as a whole, there’s some truth in these claims, though not enough to offset the dramatic contrast between the huge gains before 1970 and the relative stagnation thereafter. But over the last decade or two, these excuses have run out.

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My piece in the National Interest is now up under the exciting headline China’s imminent collapse. That’s great for reader interest – the piece has only been up a few hours and is already #1 on the Most Popular list, but I fear readers will perceive a bit of bait and switch when they reach the conclusion

Given the opacity of the system, there is no way of telling how and when a breakdown might occur except to observe that is likely to be precipitated by an economic crisis of some kind. Moreover, there is no way to tell whether a crisis would produce a relatively smooth transition towards democracy or something more chaotic and perhaps bloody.

Paul Krugman tells me he gets to choose his own headlines, a rare privilege in the world of newspapers and magazines. I asked my Australian Fin Review editors about this and they have said I can suggest them if I want to, though the tradition there runs more to cute subeditorial puns that I can’t really replicate.

Meanwhile apologies to readers for not providing accessible links to the papers I mentioned in my previous post. Through a mental process I won’t try to explain, I’d convinced myself that simply uploading the papers to CT would result in the imminent collapse of our hosting facility. Looking at the filesize that’s silly. So here are near-final drafts of:

The Politics and Society piece on financial markets
The Chronicle of Higher Education piece on inequality and the admissions race

CT has long been the go-to blog on the cultural significance of underwater zombies (as in this classic). But now as reported by Paul Krugman in the NYTimes, they’ve taken over the ECB.

Time to move on past 9/11 after 10 years I think. I’ve had a few pieces out recently that might be of interest to some CT readers: mostly paywalled I think – I guess I’m obligated to give them first dibs, but I’ll put up a near-final draft if there is enough interest

• In Politics and Society a piece entitled “Financial Markets: Masters or Servants? ” Abstract

  Throughout the history of capitalism, there have been tensions between financial institutions and the state, and between financial capital and the firms and households engaged in the production and consumption of physical goods and services. Periods of financial sector dominance have regularly ended in spectacular panics and crashes, often resulting in the liquidation of large numbers of financial institutions and the reimposition of regulatory controls previously dismissed as outmoded and unnecessary. The aim of this article is to consider measures to restore financial markets to their proper role, as servants rather than masters of the market economy and the society within which it is embedded.

• In the Chronicle of Higher Ed, Cutthroat Admissions and Rising Inequality: A Vicious Duo developing some ideas I’ve talked about here regarding the narrowing of access to elite universities and jobs in the US

Also, a piece coming out soon in the National Interest, about China and Summer Davos. Generally, I think that the current Chinese regime is unsustainable, and that its attempts to throw its geopolitical weight around are silly. On the other hand, there is no reason to expect a smooth transition to market liberalism, let alone to democracy.

As rediscovered by Salvor Hardin, in Foundation by Isaac Asimov:

“A horse having a wolf as a powerful and dangerous enemy lived in constant fear of his life. Being driven to desperation, it occurred to him to seek a strong ally. Whereupon he approached a man, and offered an alliance, pointing out that the wolf was likewise an enemy of the man. The man accepted the partnership at once and offered to kill the wolf immediately, if his new partner would only co-operate by placing his greater speed at the man’s disposal. The horse was willing, and allowed the man to place bridle and saddle upon him. The man mounted, hunted down the wolf, and killed him.

“The horse, joyful and relieved, thanked the man, and said: ‘Now that our enemy is dead, remove your bridle and saddle and restore my freedom.’

“Whereupon the man laughed loudly and replied, ‘The hell you say. Giddy-ap, Dobbin,’ and applied the spurs with a will.”

Further reading from the ACLU (via Glenn Greenwald).

As I’ve mentioned a few times, I got a lot out of Erik Olin Wright’s Envisioning Real Utopias, and am still hoping our long-promised book event comes to fruition. The general idea of the book was in line with my thinking that technocratic rationality, of the kind offered by, say Obama or Blair, is not a sufficient answer to the irrationalist tribalism of the right – the left needs a transformative vision to offer hope of a better life, both for the increasing proportion of the population in rich countries who are losing ground as a result of growing inequality and for the great majority of the world’s population who are still poor by OECD standards[2]. So, Utopia matters.

But it’s just as important that utopia be feasible. Utopia as a dream may be comforting, but is unlikely to inspire effective political action. And attempts to implement a utopia that isn’t feasible are bound to end in failure, quite possibly disastrous failure, as the experience of communism showed us.

So, my idea was to think about what kind of transformative vision might be both feasible, and capable of inspiring effective action. I had a first go at this here and here, in relation to education.

Turning to health care, we could start with a utopian ideal where everyone got all the health care that could benefit them. But that would be utopian in the pejorative sense – the scope for expanding health services is effectively infinite, and the resources available to society are not.

Thinking about feasible utopia, on the other hand, it seems to me that the system of socialised health care in modern social democracies is not a bad model. That is, if all of society worked like the health care system at its best, we could regard the political project of social democracy as a success.
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So, I finally stumbled across Isaiah Berlin, The Crooked Timber of Humanity, Chapter 1 of which ‘The Decline of Utopian Ideas in the West’ ends as follows

a liberal sermon which recommends machinery designed to prevent people from doing each other too much harm, giving each human group sufficient room to realise its own idiosyncratic, unique, particular ends without too much interference with the ends of others, is not a passionate battle-cry to inspire men to sacrifice and martyrdom and heroic feats. Yet if it were adopted,it might yet prevent mutual destruction, and, in the end, preserve the world. Immanuel Kant[1], a man very remote from irrationalism, once observed that ‘Out of the crooked timber of humanity no straight thing was ever made.’ And for that reason, no perfect solution is, not merely in practice, but in principle, possible in human affairs, and any determined attempt to produce it is likely to lead to suffering, disillusionment and failure.

Broadly speaking, I’m sympathetic to what Berlin is saying here. Revolutionary utopianism has been a disaster, particularly for the left. But, we still need a feasible version of utopia to oppose to the appeal of irrationalist tribalism and the naked self-interest of the top 1 per cent. And, whatever Berlin may have intended by it, “prevent people from doing each other too much harm” should not mean leaving the rich to enjoy the fruits of a system constructed in their own interests, and letting the devil take the hindmost.

A social democratic and feasible utopia should giving all human beings (individually and as a member of various groups) sufficient room and resources to pursue their own idiosyncratic, unique, particular ends with a reasonably equal capability of achieving ends that are feasible given the resources available to society as a whole.

It’s hard to spell out what that means, but I think easy enough to see that developed societies were moving in that direction, broadly speaking, until the 1970s, and are mostly moving away from it today (with some exceptions in areas like gay rights). The failure of the market liberal model to deliver on its promises, evident in the global financial crisis, along with the current struggle over austerity provides an opportunity to recover some of the ground lost in the last thirty years while, hopefully preserving the gains.

fn1. As in many such cases, our blog’s name and tagline owe at least as much to Berlin’s translation as to Kant’s original.

I was thinking about the possibility of an Obama v Romney matchup in next year’s election and it struck me that, in a lot of ways, Romney looks like Obama’s role model. That’s true in terms of their signature policy achievements (very similar health care policies), their general lack of (and even disparagement of) commitment to particular policies or principles, and their acceptance of the centrist view of the world in which the correct position is always midway between extremes, however those extremes may have been determined, and whatever their substantive content. Romney’s success in winning office in Massachusetts was a model for Obama’s success in what is (at least in Obama’s view and that of his advisors) an essentially rightwing country. Romney even gets some diversity points for being a successful member of a minority group.

As a temporary alien and permanent foreigner, I don’t have to worry about voting. But, of course, like everyone else on the planet, I will be significantly affected by the outcome. Still, as long as the Congress remains divided, it’s hard to see a choice between Obama and Romney making a big difference (of course, I thought that about Bush v Gore, so there you go).

The seemingly imminent downfall of Muammar Gaddafi may not represent “the end of history”, but, for the moment at least, it’s pretty close to being the end of tyranny, in the historical sense of absolute rule by an individual who has seized power, rather than acquiring it by inheritance or election. Bonapartism (if you exclude its more specialised use to refer to supporters of the Bonaparte family claim to rule France) , is probably the closest modern equivalent. Forty-odd years ago, this kind of government was the rule rather than the exception in most regions of the world (notably including South America and the Communist bloc), and was represented even in Western Europe by Franco and Salazar.

Now, there’s Mugabe clinging to a share of power in Zimbabwe, along a bunch of less prominent, but still nasty, African dictators in the classic post-colonial mode (in the original post, I underestimated the number of these who are still around, but they are clearly a dying breed). Add in a handful of shaky-looking strongmen in the periphery of the former Soviet Union, and that’s about it for tyrants in the classical sense.

Normally classed as tyrants but not meeting the classical definition, Kim jr, Assad jr and Castro minor (and some others mentioned in comments), the first two of whom are certainly tyrannical in the ordinary modern sense, but all of whom inherited their positions, as of course, did the remaining absolute monarchs. The historical evidence, starting with Cromwell jr, and running through Baby Doc Duvalier and others is that regimes like this hardly ever make it to the third generation. They combine the low average ability inherent in hereditary systems with a lack of either royal or revolutionary, let alone democratic, legitimacy.

More interesting cases are those of Museveni in Uganda and Kagame in Rwanda, illustrations of the point that tyrants in the classic sense need not be bad, at least relative to the alternative they displaced. But these seem to be isolated examples, owing much of their appeal to the horrors that preceded them and the fear that those horrors might return.

More surprising to me are the number of cases where classic tyrants, having established one-party states, have been succeeded by self-selecting oligarchies – China is the most striking example, but Singapore also fits. Looking at the evidence of the past, I would have predicted that such oligarchies would either collapse in short order or see the emergence of a new tyrant, but there is no sign of that for the moment.

I don’t have a good theory to explain the rise of so many tyrants in the modern period, beginning with Bonaparte (or maybe Cromwell), or the sharp decline of this form of government from around the mid-1960s. But it seems that it’s a development worth noting.

fn1. Putin is often presented as being a near-dictator. But he doesn’t need to repress his opponents – it’s pretty clear he would easily win elections in Russia with or without doing so. Conversely, there’s no real evidence to suggest that he could or would hold on for long if public opinion turned sharply against him.

Matt Yglesias[1] says

Many on the right and center indicate that in order to restore the economy, President Obama needs to do more to cater to the whims of rich businessmen. Many on the left feel that this is exactly wrong and that in order to restore the economy, President Obama needs to do more to stick it to the rich and dispossess them. History suggests that both are wrong.

He goes on to give plenty of evidence for the wrongness of the first proposition, and none at all for the second.
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The National Interest has just run a piece I’ve written on the S&P downgrade. I had understood this was a conservative publication, but I tend to got lost in the varieties of US conservatism (and, for that matter, liberalism). Anyway, they seemed happy to run this as well as an earlier piece on Europe. A quick look at the website didn’t suggest I was in bad company – most of the foreign policy stuff was anti-war, and the other economic pieces were eclectic.

Is there an up-to-date guide for overseas visitors to the US scene? It’s nice to be called up from the Australian farm team, but I don’t want to end up in some glossy publication that turns out to be funded by LaRouche.

It’s rare to take on Paul Krugman in an argument and win, and I agree with him most of the time anyway (these two facts are correlated!). So, this is the first time, and will probably be the last, when I can claim a win in such an argument.

Krugman has long criticised the eurozone on the grounds that it is not an optimal currency area and that the European Central Bank must therefore pursue an unsatisfactory “one size fits all” policy, too contractionary for economies that are doing badly and too expansionary for those that are doing well. Back in February, I argued that in fact ECB policy was “One size fits nobody” and that even Germany was vulnerable to its contractionary effects.

The latest statistics suggest that German growth was already stalling then. Today, Krugman is also pointing to a “one size fits none” policy.

At this point, it’s time for a suit of clothes, and that means a new tailor. And, in that respect, the bad news may have a silver lining.

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