Gaps and holes

This Washington Post Wonkblog article may be of interest: “How the U.S. became one of the world’s biggest tax havens”

“The gaps and holes are the market.”

The invisible hand is a pickpocket.

Spot on. I had the exact same reaction.

@6 Really? Like David Cameron’s father? Simon Cowell? Stanley Kubrick?

http://www.theguardian.com/news/2016/apr/06/panama-papers-reveal-offshore-dealings-stars

I don’t remember any of those guys being corrupt politicians. But with Reason, when you only have a hammer everything is a problem due to government.

Yup

As I’ve argued in the past, activities like tax avoidance/evasion and regulatory arbitrage aren’t peripheral flaws in a financial system primarily concerned with the efficient global allocation of capital. They are the core business, without which the profits of the global financial sector would be a tiny fraction of the $1 trillion or so now reaped annually.

Could you link to some of these past arguments? I’m interested in how this is quantitatively demonstrated

See Keynes quote in the past paragraph regarding uncontrolled inflows and outflows of capital…definitely destabilizing and not allocating capital efficiently but merely enriching the financial sector.

http://oecdinsights.org/2012/08/29/is-the-financial-sector-worth-what-we-pay-it/

Its kind of heartwarming to see how our differences dont really separate us.

When you see that the same firm handles Venezuelan corrupt generals and the Spanish royal family members… why cant we be friends?

Tax avoidance is hardly new, its mentioned in the Bible and existed long before that. I’ve never heard of any person rich or poor who would willing pay more tax when legal means exist to pay less – the outrage should be directed at how such people/organizations accumulated the sums they did – not at how they are failing to remit some percentage of it as tax.

Until tax laws are written as simply as “how much did you make – send in half” there will be organizations devoted to working in the ‘gaps.’

The amazing complexity of nearly all tax codes is the long-term consequence of special interests, influence buying and political patrimony…while no doubt facilitated by “the banks” and “the lawyers” it seems a bit narrow to only blame the distributors of the problem rather than the manufacturer. At least the distributors were serving their clientele (corrupt though they may be).

I meant perpetual

Trader Joe @18

This kind of argument is common, reduce complexity. But I often wonder at it. All direct tax systems are likely to be complex as different tax payers have different personal situations. Which can become very complex. Also Governments try to use tax regimes for social policy objectives. There is a limit to how far complexity can be reduced and fairness maintained. Is not complexity overrated as a reason for tax avoidance? These days there are things called computers and software which can deal with a lot of complexity.

“You are equally right to say that “sociopathic” is a good description for both the market ideology and many of its individual adherents”

I don’t think he’s saying that at all. He seems to be saying – as will several other crackpots, soon enough – that absent government intervention, the market will deliver wonderful, pareto-optimal outcomes or something along those lines.

@22
You make the perfect neoliberal case – you want special tax rules to maybe help small farmers or shelter income from green energy projects or whatever you fancy is the right industry/group to subsidize.

Then some clever tax/legal team comes along and structures a series of corporate holding structures so that the next thing you know a hedge fund is getting small farm tax breaks and the dividends are being remitted to Guernsey to be invested in Bermuda.

If you insist that the tax code be the vehicle for wealth redistribution you’ll always have grey lines that clever people can straddle. If you choose to redistribute wealth more direclty and stop randomly favoring industries which there is approximately zero proof helps them, you have a shot at a better solution – you’ll still have tax arbitrage between countries with different codes, but you’ll reduce the need to offshore earnings in the first place.

Looking forward to copycats releasing similar documents from the many other major
tax havens: the US, BVI, Caymans, Switzerland (plenty more to come from there), Lichtenstein, etc., etc. Come on copycats – more docs please!!

Trader Joe, etc: It’s legitimate for the State to write tax law in a way that promotes the interest of the State, which we hereabouts like to refer to as “the people”. It is also legitimate and not that hard to discriminate between those who are paying their share and those who are taking advantage and “the way of peace they have not known.”

John is right OP, shoot a few of them and the rest will settle down.

@31

Yes indeed, we need the answer to that lickety jump and get it out on the web before the NY primary!

@Jesús Couto Fandiño

Venezuelan corrupt generals and the Spanish royal family members

And now Macri!

@31,@32: You can read the text at https://ustr.gov/trade-agreements/free-trade-agreements/panama-tpa/final-text

Most of the tax-avoiding schemes reported thus far began well before the trade agreement went into effect in October 2012. FWIW there’s an AFP piece this morning quoting the Canadian PM saying that the trade deal actually increases his government’s leverage with Panama in going after tax evasion.

The Obama admin, especially in its first term, had a pretty creditable record going after international tax evasion, including enforcement actions, international agreements, and new legislation … in the face of fierce Republican opposition. Surely it could have done more, but I’m not sure this particular issue tells against HRC.

Colin Danby @ 37

Secretary Clinton spent 4 years as Secretary of State raising money for her husband’s foundation from corrupt world leaders and her campaign is financed primarily by individuals associated with the financial sector, so of course, this issue couldn’t possibly tell against her.

Oxbird @ 38: the key to stopping such appalling behavior . . . is in rigorous and and even harsh enforcement.

The truly appalling behavior is by our elite leaders — this is demand-driven. The banks and law firms and other institutions are gleefully responding to demand from the very people who would have to act in order for enforcement to be effective.

Go to Wikipedia and look up Bradley Birkenfeld, the whistleblower against UBS’s tax fraud schemes against the IRS. He was prosecuted for his troubles, and served time in jail — pretty much no one he exposed, either among the tax cheats or his bosses served time. After a clever PR and legal campaign, including an appearance on 60 minutes, the IRS awarded him $104 million dollars, but the IRS responded to the discovered tax fraud with an amnesty program. Oh, yeah, and while Birkenfeld was being sentenced to 40 months in prison, Obama — he with Danby’s “creditable record” — was playing golf on Martha’s Vineyard with Robert Wolf of UBS.

I don’t have doubt that Hillary Clinton will be elected. So, I have the pleasure of being pissed off locked up in advance and in certain anticipation.

All the lesser evil rationalizations about the morally vital matter of electing the termagant virago El Presidente have been fully discounted in my market.

@bruce wilder

termagant virago La Presidenta.

“too cute”

Trader Joe:

“Tax avoidance is hardly new, its mentioned in the Bible and existed long before that. I’ve never heard of any person rich or poor who would willing pay more tax when legal means exist to pay less”

Au contraire. Any tax bureaucrat will tell you that 90% of tax collects itself – you send a letter and people pay. Compliance and enforcement is concentrated on the remaining 10%. This gets the publicity (designedly), but it’s not the bread and butter of taxation.

Bruce Wilder “Irresponsible idealists do not realize that its collapse could easily take the global economy with it.”. Actually, it could indeed. And while many – perhaps most – ordinary people would be better off, a great many would suffer. Money is a pump whose pressure enables longer chains of production. Lower the pressure, and the chains shorten, to the detriment of those who live off the furthest reaches.

bruce wilder @30 and @39 and @41

1. If Hillary Clinton wins the Democratic nomination and is elected President, there are going to be a lot of her supporters who are bitterly disappointed by her performance as President. Not all of them, and not even a majority of them, but a lot.

2. If Bernie Sanders wins the Democratic nomination and is elected President, there are going to be a lot of his supporters who are bitterly disappointed by his performance as President. Not all of them, and not even a majority of them, but a lot.

3. If the Republican candidate is elected President, there are going to be a lot of people who decided not to support the Democratic candidate (whoever it is) who bitterly regret their decision. Not all of them, and not even a majority of them, but a lot.

Times imitates Quiggin:

Some 55 per cent of US companies’ international profits are booked in tax havens, compared with about 15 per cent in the early 1980s, according to economist Gabriel Zucman.

Don’t know if this has been linked to yet http://fusion.net/story/288515/panama-papers-leak-art-market/

@ johnQ

>As you say, BenK, the same free-market conservative politicians and advocates who gave us financial deregulation have profited massively from it. See also Russia, oligarchs etc.

russia is a free market paradise now? http://www.heritage.org/index/country/russia

Russia has one of the least free markets in the world, precisely because they didn’t go through shock therapy. They started, but reversed course after about 6 months.

@Brett Bellmore

You’re precisely right. the list of criminals and heads of state on the lists of people involved makes a mockery of the claim that this wealth had anything to do with capitalism. Also notable is the lack of americans on said lists. But somehow, the US and capitalism are still to blame.

http://www.mirror.co.uk/news/uk-news/resign-david-cameron-calls-pm-7713837

24, 36: Actually I did have a few points to make, but now I am not going to.

“You don’t have to be a geopolitical genius to work out exactly why it was that so many people all over the world in the third quarter of the twentieth century were so keen on the idea of bank secrecy. Lots of them had been given a pretty harsh lesson about confiscation of assets, and millions more were living in the shadow of the Soviet Union. Bank secrecy was the default position.”

Also referring to the post with the comments off, this is some particularly obnoxious Lehman-splaining of tax cheating. It’s about freedom and opposing communism!

“The fact that the majority of the population of Europe lived in the fear of a Communist invasion for forty years is not something that can be yaddayaddaed away.”

Certainly not. And of course, it was the coal miners, and the grocers, and the train conductors, and the file clerks, who squirreled all that money away in their secret accounts in the Caymans, so the Reds couldn’t seize it. Right? Or could it be that this whole ‘fear of Soviet invasion’ thing is just a way to lend some cover to wealthy people who worked the system so as to fuck over everyone else?

The Swiss Cheese post was interesting with the history of the tax havens and secrecy, but I am wondering if people in the finance industry would have had the ear of government when the government was facilitating tax havens etc, rather than that the government just came up with these policies itself. I would think there would have been quite a bit of consultation with the finance industry.

Our Prime Minister recently gave a speech on banks not doing enough in return for their social license to operate, especially after the government helped them through the financial crisis by guaranteeing them. I wouldn’t be surprised if there is some reform of banking and finance on the table, as the Prime Minister has become so gloomy about the prospects of tax reforms he offered to give back the power to tax to the States again so he didn’t have to worry about it anymore. None of the States wanted the power to tax back again, so the Prime Minister still has to think of something else to do about taxing, so now with this new banking scandal he has a good reason to reform banking to increase government revenue.

Dsquared,

Did you just bring up the exisiting socialism v real socialism argument to ruin John Quiggin’s thread ?

No, I think it’s to do with the other post, where part of the claim is that people were squirrelling their money away in case there was a soviet invasion.

@Phil, I think it’s interesting and informative, too, and it’s the slant that’s the problem. If you say ‘secret bank accounts and tax havens were invented so that wealthy people could hide their money from their own governments, out of fear of excessive taxation and creeping socialism’, you have the same set of facts, but it doesn’t work nearly as well as a defense of banksterism and the 1%.

“You don’t have to be a geopolitical genius to work out exactly why it was that so many people all over the world in the third quarter of the twentieth century were so keen on the idea of bank secrecy. Lots of them had been given a pretty harsh lesson about confiscation of assets, and millions more were living in the shadow of the Soviet Union. Bank secrecy was the default position.”

I was going to stay out of this, I really was, but the above is puzzling. When someone says that lots of people had been given a harsh lesson about confiscation of assets just before the third quarter of the twentieth century, I think automatically of Holocaust survivors. And Swiss bank secrecy was the standard for bank secrecy. And the Swiss banks, as far as I know, used that secrecy to keep hold of assets that went unclaimed for obvious reasons.

Using this as an argument *for* bank secrecy is, again, puzzling.

Bruce Wilder @39 “The truly appalling behavior is by our elite leaders — this is demand-driven. The banks and law firms and other institutions are gleefully responding to demand from the very people who would have to act in order for enforcement to be effective.” Only to some limited extent. Decisions made within US attorney offices and by relatively low level regulators can also impact, which is not to deny that what is needed is a cultural change on this and other enforcement issues. And, the demand does not only come from political leaders. Numerous “good citizens” of significant wealth are directed by their advisors to pursue these schemes.

Thoughts on this ?

http://www.newleftproject.org/index.php/site/article_comments/the_new_dependency_theory

geo: This is a very curious and unfortunate phrase. Why shouldn’t they have had recourse to democratic politics, like the rest of us?

I thought that was answered in the post and was one of the interesting (and provocative) observations:

“The global upper class found out (the hard way) that inflation is the tax you can’t avoid, and their reaction to it was to reverse the exit-voice choices that they had made during the trentes glorieuses.”

His claim is that the decrease in inequality post-war wasn’t the result of political victory over the powers of capital, it was a fight that the wealthiest chose to sit out and, when those people did become invested in democratic politics, they wielded a great deal of influence, and that has shaped recent politics.

It’s a story which gives a lot of deference to the power of wealth, but it’s an interesting claim.

Ah. As a wise commentator once said about dsquared, if he didn’t exist, we’d have to make him up. You have to admire that constant air of authority. On pretty much any topic. I recall the London banker bank-splaining how the US Chamber of Commerce works and how powerful Brad DeLong was in the Clinton administration. Amazing what he knows. Well the lickspittle of finance is back as predicted. And, once again, the story is the same: someone held a gun to a banker’s head and forced them to make more money.

It seems to me that d-squared’s analysis of motivations and consequences (intended as well as unintended) dovetails neatly with Bruce Wilder’s analysis of institutional decay. The interesting part is that what Wilder views as decay, d-squared views as the-way-the-world-works (so stop whining.)

All else being equal, both viewpoints have their merits, but if it’s more equitable social and economic arrangements we’re interested in — and being nearer the bottom than the top of the food chain, that’s most definitely what I’m interested in — Wilder’s view offers us possibilities that d-squared’s doesn’t. Even though their access to more complete and timely information, not to mention their command of superior physical resources, allows the administrative classes to win any present argument, we nevertheless retain the option of changing the subject. Cold comfort that may be, but at least we can ignore the lectures while we’re being beaten.

@82 and @80 Sebastian H & geo

“His claim is that the decrease in inequality post-war…”

Except that’s not when the decrease in either wealth or income inequality began. At all. http://www.newyorker.com/news/john-cassidy/pikettys-inequality-story-in-six-charts

Take a look at the figures entitled “Wealth Inequality: Europe and the US 1810-2010” and “Income Inequality in Anglo-Saxon Countries, 1910-2010”

Facts are pesky.

T @ 85

The big drop in inequality happens around 1940 – essentially with the move to a war economy. The post-war years seem to be an extension of the war.

Daniel’s post tells a story about a break between “exit” and “voice” in the 80s, with functional (for the moneyed classes) offshore banking and secrecy before that, and “voice” after (with the erosion of both). I don’t think this fits with either the timing or the volume. It is notable that this latest leak was a leak, not a disclosure by the authorities in preparation for another crack-down.

kidneystones@86

Are you whining about other people whining?

It is notable that this latest leak was a leak, not a disclosure by the authorities in preparation for another crack-down.

My father’s of the opinion that it’s an NSA operation, claiming that no americans have been named.

I’m not convinced, but I’m not going to dismiss it either; it’s certainly within their capacity.

92@ Yes. Pointing out bigotry and transparent double-standards is a duty when it comes to the evils, and scurrilous abuse when directed at Dems.

Thanks again for illustrating the differences so clearly. Look forward to your next.

> With all due respect to Mr Wilder, it’s most definitely a case of the-way-the-world-works.

How would the world look if your opinions were unchanged but, unbeknownst to you, they were in error?

Ze K @95

If the base determines the superstructure, what determines the base?

To put it in a cute homily. Imagine a nice elderly couple are going to their local pub on a Sunday, for a drink and a dinner and a chat. But when they get there it’s full of twenty somethings continuing their drug fuelled session from the night before. The bar owner has put a dj in the corner and is serving bottles of ciders and craft beer rather tHan the usual, and the kitchen is shut down. To the elderly couple this might seem like decay, but it’s a business decision. The owner wants to serve a different demographic, wants to chase a bigger buck.
Of course drug fuelled after sessions might be fun (who knows) but people still have to eat, relax, communicate in a non trivial manner. The owner is putting his money on the elderly dying off soon, and although the twenty somethings will eventually hopefully mature, there will (he guesses) be another group with the same blase attitude and lack of responsibility along soon to engage in the same manner of debauchery. But this is where he’s wrong, eventually his business model with actually decay, there will be vomit in the bathrooms, fights in the bar, stones through the window as people get thrown out.
So Bruce might be right, actually. I just don’t think we’re at the decay stage yet. We’re at the end point of the institutional change Though no doubt when we get to the decay part , with the social unrest and assassination campaigns against the absent landlord class that will surely follow, people will express shocked and dismay at what’s become of us. But it’s hardly unpredictable and it’ll be their own fault.

My impression is that the elite (whether they survived through superstition, inherited position, or genetic endowment) tended to live under the ever present threat of violence. The hard men of the village would always be lurking in the background. The fear of the midnight knock at the door, the anonymous posting of misbehaviour that wouldn’t- be tolerated on the town hall door. Their behaviour was implicitly and explicitly regulated by violence and the threat of violence. That doesn’t exist anymore.
Bear in mind I’m not excusing such a scenario , just explaining how the world works imo.

Doesn’t regulate elite behaviour any more.

Ze K @ 95 and Ronan(rf) @ 97

At this point I’m a little afraid of waking up to find myself standing in Woody Allen’s line behind BW himself. Exegesis can be fun, but it’s never as authoritative as the original. (Unlike, say, Brad DeLong, or d-squared himself, BW doesn’t appear with a flash, bang, and puff of smoke every time you utter his name, but still….)

@107

Just like men.

Drat! I KNEW it!

Ze K

“It’s more like this: people live in a village, plow their fields, grow stuff. Wholesome monotonous village life, church, community, all that. Then one day the steam engine is invented, and soon (in historical terms) everything changes. These same people are now in a city, living in some dorms, in the midst of poverty, crime, prostitution. So, what happened, did the elites get corrupt?”

I think maybe it was more like that in Russia and I guess near by countries as I’m not sure where you’re from, since modernization was later and less gradual because of that than England. Also you had such great troubles with leaders and violence. A girl I knew was studying the Russian Revolution and she always was saying why didn’t they just copy constitutional monarchy from England. And there was all the stuff with mules with gold teeth which I can’t recall if it was true or propaganda against kulacs. You don’t have any luck with governments in Russia, your best one was probably Tsar Alecander who freed the serfs.

I am more inclined to blame Russia’s troubles with modernization on the Tsar and the revolutionaries and maybe anyone that gave their mules gold teeth if they did which is a waste of gold, than steam trains.

Although in fact I am pretty sure your argument is one of the arguments the revolutionary government used – that modern technology occasioned the formation of a modern form of government, instead of the tsar.

What is it that Quiggin likes to say about furious agreement breaking out? OK, maybe not “furious” but we all seem to be aware that there’s conflict between elite(s) and commons built into society, and that top >< bottom cooperation cum strategic struggle shapes political and economic institutions.

The value judgments, perhaps because they touch on our personal political commitments, touch off emotions, and I don't think one can usefully detach entirely from the value judgments — values are a core component of the dynamic social contract. So, I say, "decay" and I mean it as a value judgment and others hear it as a value judgment (not the same judgment in the ear as the mouth, be that as it may). I also mean "decay" as an objective description of the dynamics of institutions under the pressure of strategic competition — people playing the game, and the rules of the game changing under the pressure of the way the game is played.

Ze K: fundamental shifts are not explained by “elite behaviour”; elite behavior is explained by the fundamentals.

Yeah, no. The dialectic of the conflict produces the dynamic evolution of institutions. The dramaturgy of narrative explanations — mine, d2’s, Whig history, William Jennings Bryant and the Cross of Gold, Donald Trump, The Eighteenth Brumaire of Louis Napoleon, Keynes’ General Theory — that may be crap or genius, ymmv, but it is always of a time and place, and colored with values, ideologies and the norms of contemporary institutions.

I’m not pushing a fact-value distinction as a “solution” because it is not a solution. None of us can reach a god’s eye pov from nowhere with regard to social institutions, especially social institutions we live with.

Above was in response to mcm

Ronan(rf) @ 120: The “system” (whether the political, financial or capitalist) has agency. We’re merely living through events that “we” have no control over. Things are happening and no one has any responsibility or influence.

Are you referring to d2’s opening gambit?

dsquared: . . . as always, I tend to assign agency to the political system more than to the financial sector. Nearly all of those holes were intended to be there, and it was intended that the financial system used them. The process whereby the behaviour involved is redefined from acceptable deviancy to unacceptable is very interesting . . .

“intended” just seems to sit there like unexploded ordinance — if you go to examine it closely, it might take off your hand.

T: “The notion of finance as courtiers to the rich rather than the rich themselves has been pushed by dsquared past the point of embarrassment. What was Rubin paid post-Clinton? A quarter of a billion?”

Given how much of the economy the financial sector now takes up — 20% of total gross domestic product in developed economies, according to this — the financial sector pretty much *is* the rich. Sure, there are some people like the Koch brothers who still make their money off of brick and mortar industries, but they are increasingly the exception.

“Decay” is not strictly a value judgement. One of the meanings of decadence is that society can no do the things that it used to be able to do. We used to be able to solve problems, more or less, and often very brutally, but I can’t think of a recent large-scale instance of problem solving since the Montreal Protocol. The Paris Agreements were good, but in practice people are leaving this problem to the marketplace, which means that they are sort of hoping that technology advances. The Internet is the same kind of thing — luckily a protocol escaped that was suitable for people to work on it ad hoc, and wasn’t captured by the usual entities that try to capture things, so that it could grow on its own. But there was no problem solving as such.

J-D @ 48

fair points. I’m British so for me”We” is the UK electorate, and “You” is the Corbynite left.

One thing that a UK government could do is around home ownership. Planning laws in the UK make a clear distinction between domestic residences and business premises. I cannot turn my house into an office block or factory. It should be straightforward to pass a law that domestic property cannot be owned by businesses; it can only be owned by individual people. There are tunes to be played here round restrictions on eligibility, but that would be a start.

@ Dipper

One thing that a UK government could do

The financial system is global and the solution will only come by looking at the big picture. Any national solution is just a demagogic band-aid on a gaping hole.

Rich Pulchasky: there was no [large-scale] problem solving as such [in creating the Internet]

Some of it doesn’t seem “large-scale” because it happened in embryo, but fundamental architectural choices were made in “centralized” entities like DARPA and Xerox PARC and even Congress (Yes, Virginia, Al Gore did invent the internet!) that greatly simplified the problems of distributed cooperation. Some of it was large-scale by any reckoning, but it took place smoothly within the political frameworks of multinational business corporations — exactly the usual entities that capture such things, but so “usual” that we can fail to credit its importance, even as we celebrate the romance of guys in garages.

Lupita: The financial system is global and the solution will only come by looking at the big picture. Any national solution is just a demagogic band-aid on a gaping hole.

I wouldn’t discount the need for a large helping of demagoguery.

The financial system patches over a lot of conflict and struggle over the distribution of income and wealth with a system to facilitate distributed decision-making and cooperation in the “efficient allocation of resources and investment” blah blah.

It can be a question of having to get mad, to get even.

Lupita @130. the UK housing stock is not necessarily a global asset. The UK government can control access to it as they can to all other aspects of the UK.

BW: “It can be a question of having to get mad, to get even.”

This is bringing us far off of the ostensible topic, but I don’t think so. Or rather, I think that people here generally understand the economics a lot better than they understand the politics of change. (Not that I have any great understanding of this myself.) But from what I’ve read about previous, um, high-change societal situations, degree of social anger doesn’t necessarily bring change and it even more emphatically doesn’t necessarily lead to good change. Trump supporters are angry, but they have no real idea what is causing their very real economic losses and the policies and politicians that they support are more likely to cause them even greater losses than the reverse.

You can ask: what will motivate people to force elites to change the system other than anger? There’s two broad kinds of answers. 1) Immiseration — whether people are angry or not, once they get desperate enough, they have to act. 2) Ideological buy-in. If people broadly agree on a new ideology they can organize to have it replace the old. This doesn’t necessarily involve anger per se, but can be an intellectual and visceral belief that the old system no longer works and has to be replaced by a better one.

The problem with generalized anger is that there is not an ideology that actually addresses our present, pressing problems that’s waiting in the wings. Without that, anger leads in random directions, and is easily directed by elites against remaining elements of the old order that they don’t like.

Bruce @137
dsquared shtick is that the finance sector is always reactive. “as always, I tend to assign agency to the political system more than to the financial sector” Many of his recent posts and articles are directed at absolving the sector of responsibility for the Great Recession. His current post is part and parcel of the same assigning of agency. The method is typically deductive. That is very convenient in that it requires no specific knowledge of how the sausage gets made. And almost every time he makes the mistake of wading into the specifics on the US side he makes an ass out of himself. I still have no evidence that he knows how the finance sector exerts influence in the United States over the last several decades.

Your statement that “I didn’t think his account of the world up to 1970 was far off the mark at all” seems to be an admission that he has, at a minimum, got the last 45 years wrong. But is that all he has wrong? Wish it were that easy. At a minimum you really want to go back to an earlier era when the financiers were in charge — at least back to Morgan. It wasn’t the large national debt in the 50s you speak of that stopped the creation of the financial machinations we see today — there were other destructive financial instruments in 20s and earlier before the debt you speak of arose. You can’t put the 50s in context without the Great Depression, the New Deal and most importantly the financial regulation of the 30s.

The reactive story — finance just waited around for 50 years until Reagan “when the agency of the political” made it all OK again — just doesn’t fly.

Wall Street banks, companies and trade associations continued to spend big bucks–$1.4 billion–to influence policymaking in Washington during the 2013-2014 election cycle.
Volcker lambasts Wall Street lobbying
Wall Street Steps Up Political Donations, Lobbying Firms Boost Outlays Amid Debate on Financial-Services Overhaul, After Slowing Spending While Getting Bailout Cash
Etc etc

Ten million things have been written about ideology, and I don’t want to get into a real consideration of what they are. Let’s just take them to be typical political ideologies like liberalism, conservatism, socialism, anarchism, nationalism etc. There is no mass ideology that works, where “works” I take to mean: addresses the primacy of environmental limits, addresses increasing productivity and resulting lack of need for most people to work, addresses the increasingly severe problems of the nation state and of how nations act within a global order.

I read that the people of Iceland, displeased with their PM because his name is mentioned in the Panama Papers, are carrying around bananas as a symbol of their belief that the symptoms of decay of the neoliberal global system should be contained to tropical areas, you know, were the poor live. If the bananas have not reached you yet, you live in a mythical village.

@ronam

>But what does modern liberalism give us ?

You mean besides the abolition of famine, the elimination of most infectious diseases, and a standard of living that kings would not have dreamed of in the past?

>The only place we see that is on Twitter and at far right rallies, and none of it is targeted at the gentry.

you must be joking.

http://www.providencejournal.com/article/20151110/NEWS/151119893

@John Quiggin

>Not noticeably in the US, at least. Life expectancy declining for large sections of the population as modern market liberalism replaces the New Deal version.

And I’m sure the massive increase in immigrants, most of them from developing countries with the health problems that go with that, has absolutely no effect on those stats.

http://www.pewhispanic.org/files/2015/09/PH_2015-09-28_immigration-through-2065-52.png

>Or is this one of those two-step deals where free-market liberalism gets to claim all the benefits of social democracy as an argument against it.

That’s just what it looks like when you push back against the reverse two step that dominates thinking around here, where social democracy claims all the credit for the achievements of capitalism as an argument against it. A cynic is what an optimist calls a realist, after all….

One additional use of tax havens and complex corporate structures is to transfer legacy burdens (environmental clean-up, pensions, health care and so on), while of course, retaining the money. I’ve seen quite a few instances in the US where the outcome was to stiff retired personnel, but there seem to be a number here in Australia relating to environmental responsibilities as the resources crash leads to mine closures.

Dipper @128

If what you meant by ‘we can stop this’ was ‘the UK electorate can stop this’, I’m curious to know how you think that’s possible. I have a high degree of confidence in the capacity of the UK electorate to vote an incumbent government out of office (if they want to, and when an election comes round) but a much lower degree of confidence in the capacity of the UK electorate to control or influence the the actions of an incumbent government.

Sumlefty now; “the elites have turned against us” has the great advantage of referring to observable facts and social mechanisms in drawing its narrative, not an elaborate, abstract meta-narrative.

Elites, by definition, are the people largely leading society’s institutions. Under the stress of the Second World War and the threat of the Cold War, a critical fraction of the American elite was preoccupied with strengthening the society as a whole, as a way of meeting an existential threat. With the weakening of the Soviet Union and the rise of oil imports, focus shifted especially among the wealthiest and among the managerial classes toward financial gain. The increased flow of funds out of the U.S., initially to pay for oil, posed a problem: how to avoid the possibility that oil sheiks would end up owning U.S. business, a problem that was fundamentally different from the possibility that commies might organize a dissatisfied working class.

I think human agency is problematic as an explanator, not because willful choice is an illusion, but because conscious intention in the face of pervasive uncertainty is. That’s somewhat true for individual choice, but the complexity of collective, social choice raises the difficulty by a power. Collective human agency becomes a complex compound of the tragedy of Oedipus. We cannot blame the gods for our suffering; our character is our destiny, but we do not fully recognize the consequences of our actions until those consequences have been realized. And, then we may curse the gods that we see clearly what we have wrought.

Yes, we adapt to the environment, an environment which is itself largely composed of artifacts of our own making. My favored analogy is that political society is a bit like a slime mold in its capacity to adapt: myriad very loosely coupled constituent parts follow their greedy little routines in search of sustenance and fear of light, with only a very primitive, barely emergent central intelligence able to gather information and direct the collective search and overcoming of obstacles.

I think we both see globalization and the erosion of national consciousness, as you put it, among elites. That phenomenon, that dynamic has a history, because it has not always been exactly so.

If, in my interpretation, the felt dependence of elites during the first three-quarters of the 20th century on the support of the masses, because of the experience of emergent Fordist methods of industrial production and the existential threats to national elites posed by the potential in those technological circumstances of a nation-in-arms, and social democracy or the New Deal is the outcome, as a payoff by elites to secure mass support and insure the strong economic functioning of a society facing rival possibilities, does that pose a contradiction to Ze K’s views?

It is not human agency that should be questioned here, it is the efficacy of human design and intention. If collectively we are that slime mold, then our talkative politics is a struggle to think, to organize from our decentralized, loosely coupled, competitive and conflicted economic cooperation, some beneficial consciousness at the center, to arbitrate conflict and plan and solve problems, including problems of our own making. Thinking is a social process and politics is society thinking aloud, trying to figure out what we are doing, while we are doing it (and lagging a bit behind), but still trying to head off the unintended consequences before they destroy us all.

I think we are constrained in our capacity to make intelligent collective choice by the difficulty of getting politics to yield intelligent design even by tentative and experimental methods. So, what we choose collectively thru the process of politics is an adaptation to the environment that politics has previously built.

The great difficulty for all intelligence is to discover what is true, in the sense of coming to believe that which can be pragmatically relied upon to make enlightened sacrifices, aka investments, that solve problems and yield a better future. Instinctively, humans accept the need for sacrifice to appease the gods, and conservatives will deny elite responsibility, preferring to attribute agency to the market god or some such — still demanding virtuous sacrifice to appease that god, perhaps by means of fiscal austerity, balanced budgets, cuts in social security, etc.

The enlightened recognize that there are no capricious gods and virtue matters because character is destiny, but face the terrible existential anxiety of knowing that we don’t know. The question is, can we learn? And, can we accept that the price of learning is paid for in mistakes, costly painful wasteful mistakes? Tragedy is inevitable in such circumstances. A creative response would seem to require a Dionysian pessimism, a la Nietzsche, but perhaps that’s too fanciful, even for CT.

@bruce wilder

Great post. Very profound and enlightened.

Oh, the futility!

JQ is Cassanderin’ and J-D is Ze-Kin’

Just sayin’.

Also, too, agree with BW about human agency, individual or collective. I would just bite the bullet, though, and go ahead and call it determinism.

Ze K

To answer your question, ‘what does it have to do with anything?’ (comment 168), I need to recapitulate.

I made the following observation (at comment 156): ‘Your analytical model now appears suspiciously similar to saying “There’s always a bunch of stuff happening, and then after that a bunch of other stuff happening”‘

Your immediate response (at comment 157) did not repudiate this characterisation. On the face of it, it appeared to concede the point. However, in the same comment you also asserted: ‘It was meant to refute the alternative explanation: “the elites have turned against us!”‘ I understood the pronoun ‘It’ in that sentence to refer back to ‘Ze K’s analytical model’.

So, if I was right about the antecedent of your pronoun, and if you are in fact conceding that my characterisation of your analytical model was accurate, you were saying that your analytical model was meant to refute an alternative explanation, and it was relevant for me to respond by pointing out that your model (at least as I’ve characterised it) doesn’t refute the alternative explanation and is indeed not even an alternative.

Perhaps, however, I was wrong about which ‘It’ you were referring to, or wrong to suppose that you don’t contest my characterisation of your analytical model, and in either case I look forward to your clarification.

Couldn’t help thinking of CT when I read Corey’s latest

Ze K,

There is an interesting article on a Soviet city in today’s Guardian http://www.theguardian.com/cities/2016/apr/12/story-of-cities-20-the-secret-history-of-magnitogorsk-russias-steel-city

I don’t know if you have time to read it, but I in the story of the city it you can see both the agency of individuals and also what you sum up as your “steam train” theory of the role of technology and culture.

But certainly looking at various parts of the story — like the forced labour, the kulacs being dispossessed of their land, some of the city planning decisions which didn’t suit the environment or had to get approval from the central government in Moscow, — you must admit the role of human agency in decision making. And I think this article is also a case of when it is important to recognise agency, especially about the importance of memorialisation in the city’s history

“But Akhmetzyanov was not a volunteer. He was a dispossessed peasant who had been kicked off his farm in Tatarstan by the communist authorities and sent to Magnitogorsk, where he and his family were forced to work and live in a settlement surrounded by guards and barbed wire. It was the forced labour of these so-called “special resettlers” that made the record-quick construction of the plant possible.

They lived in tents for the autumn, then an earth-floored barrack through the harsh winter and hot summer, without basic amenities or medical care. According to Akhmetzyanov’s grandson Salavat, a historian who recently wrote a book about these special resettlers, 10,000 people died of hunger, cold and disease in the first five years of construction, including a son and daughter born to Ibragim and his wife.

“The story of thousands of resettlers has been forgotten,” Akhmetzyanov says. “When it comes to the war we don’t hide our losses and retreats, but here, on the topic of the 1930s, they’ve been tiptoed around.”

“If the regime had been interested in the people, the city would have built on less aggressive deadlines, and without the colossal amount of human casualties,” says Gennady Vasilyev, a local history teacher who compiles “books of memory” with the names of Magnitogorsk residents who suffered from Soviet repressions. “We have a saying that the victors aren’t judged, but this we do need to judge.”
…
Iron and steel became the watchwords of the era. “We are becoming a country of metal,” Stalin declared, and this metal was to be forged in Magnitogorsk. It became the very embodiment of the push to create an industrialised, socialist society.
…
While the existence of the special resettlers isn’t denied, it’s not readily discussed either, and a recent drive to put up a monument to them has yet to bear fruit. The administration of one district barred Vasilyev from speaking with descendants there, and he can’t find a sponsor to publish his books on a larger scale. Even today, the Magnitogorsk Iron and Steelworks website makes no mention of this forced labour on its history page.

“We need to immerse children in this topic; they are the ancestors, they should know who they are,” Vasilyev says. “The subtitle of each of my books is, ‘This should never happen again.’
…
Yet locals remain fiercely patriotic and hopeful for their city. “There are things to criticise [Magnitogorsk] for, but I criticise it with love, so that it will get better,” says Oleg Frolov, editor of the MMK-sponsored local newspaper Magnitogorsk Metal. “It produces the GDP, the might of the country. It’s not for nothing that they call us the steel heart of the motherland.””

Thanks Ze K, I found this beautiful photo essay on Russian insider from the start of the 20th C, with lots of villages and one steam locomotive http://russia-insider.com/en/culture/tsars-photographer-and-his-amazing-contribution-russian-history/ri8140

It must have been a great change for people. I suppose I can see what you mean, the change was greater than any persons agency, and very rapid. From these village life photos to the photo of the industrial city in the other article is a big transformation .