Category Archives: Economics

Neoliberalism — IT’S A COOKBOOK!!!

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“Market economics” was supposed to serve mankind. It didn’t. It really, really didn’t.

Neoliberalism – To Serve Mankind

In the early 80s people got sold on common sense kitchen-table economics. Taxes are theft. If you cut taxes government gets more money (but cutting taxes also starves the beast.) Market forces are natural law and consumers are better at making choices than government. Markets should set government policy. Government spending harms the economy. Individual choice is freedom. Big government and regulation interferes with markets. Government is the nanny state.

Reagan said, “Government isn’t the solution to our problem; government is the problem.” Thatcher said, “There is no such thing as society. … no government can do anything except through people, and people must look to themselves first.”

So we got government out of the way. We cut taxes and unleashed the corporations.

And here we are. The transfer of wealth – and power – away from the public into the hands of a very few people is nearly complete.

It’s Sinking In

“When something becomes incredibly, mind-numbingly obvious, people eventually start to see it.” – Dave Johnson

What happened to us is sinking in. As wealth (and power) concentration accelerates it has become mainstream obvious that the world was tricked. Even people like UK PM Burnham and Texas Senate candidate Talarico are using the word “neoliberal” and describing the damage done.

But now we’re in debt trap. With a few in control of the formerly-public wealth (and power) governments are rigged to “borrow” FROM the wealthy just to get by, and then pay tribute (interest) TO the wealthy for that privilege. The amounts are staggering.

IT’S A COOKBOOK!!!

In the Twilight Zone episode most of the the passengers are already in the spaceship. Mr. Chambers is still on the ramp and hears the “cookbook” warning – but it’s too late. He screams as the door closes on him.

The doors of the “end-stage capitalism” debt trap are closing on us now.

But There’s Still Time

Of course, there’s still time to get the money FROM where the money WENT. Just stop the game. Reassert power. Tax the rich. Tax back the wealth they stole from us. Before neoliberalism the top income tax rate was 90+% to prevent the very accumulation that has brought us to this point. The corporate tax was 50%. Inheritance taxes were designed to prevent dynasties from collecting vast fortunes that threatened democracy.

It’s a choice and it’s time to choose.

When Will The AI Bubble Burst?

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I started writing about the big Housing Bubble on March 26, 2005. It was obvious that there was going to be a crash. From that post,

The “For Sale” signs are sprouting like mushrooms. It probably won’t be long now.

It turned out to be long now, then. Until it wasn’t.

AI (And Stock. And Debt.) Bubble Burst Inevitable

It is obvious there has to be a crash to burst this AI bubble. It is inevitable. But this bubble, along with the stock bubble, is on top of (fueled by) the huge, worldwide “debt”* bubble. (See asterick explanation below.)

It is inevitable. But when?

Slowly, Then All At Once

Bubbles pop slowly, then all at once. (“Gradually and then suddenly.”)

The 2008 crash began slowly. The housing bubble itself peaked in 2006 and prices started down, rumors about bad loans and fraudulent collateralized debt obligation “tranches” circulated, but the fallout from that didn’t lead to the big financial panic until September, 2008. So 42 months. It began slowly, then, in September of 2008, all at once. But when it hit… it really hit. (Not that anyone was held accountable, of course.)

So when will the AI Bubble burst? The overall stock bubble will pop when the AI bubble pops. This all risks popping the huge, worldwide “debt” bubble. Worldwide financial collapse on an unimaginable scale. Great. Just great.

End-stage capitalism. Fun for all. Until it isn’t.

*The Asterick Explanation — About That $40 TRILLION US “Debt”

Debt is in quotes because the US government does not “borrow.” It creates dollars. “Mints” them. You don’t “borrow” something you make yourself. Governments sell bonds and pay interest, but that’s another topic.

People don’t know how banks get the money they loan out. They “create” it. They don’t actually HAVE the money, they just make it up out of thin air and deposit it into the account of the borrower. (They put the same amount on their books as money owed to them, so the books balance.) This is true, even though you can’t get your head around it.

Governments create money the same way. This is called a “fiat currency.” A “budget deficit” measures the money that is created by spending it into the economy without taxing it back out. The “national debt” is a measure of all the money the government has spent into the economy without taxing it back out.

$40 Trillion Floating Around At The Top

So the US government has created $40 trillion – the US National Debt. Because the system is rigged much of it has gone to the top few. Musk has a good-sized chunk of that just for himself. The other oligarchs have chunks of it. The rest is floating around at the top, various sovereign wealth funds and minor billionaires and hedge funds and such etc, all looking for places to put it and get a return. This is why there are big “asset bubbles” everywhere. Because “price go up.” (Until it doesn’t.)

The public could have had nice things. That money could have gone to fighting the climate crisis but the Green New Deal “cost too much.” It could have gone to healthcare and ending poverty and high-speed rail like China’s, and housing for everyone… A functioning democracy would have made sure that happened. But, as I said, the US “system” has become rigged to send much of the income and wealth ever upwards. Enshittification, etc.

So $40 trillion is floating around looking for ever-greater returns. AI looks promising, let’s cover the earth with data centers.

End-stage capitalism. Fun for all. Until it isn’t.

Everything Is Trickle-Down Now

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This post was first published at Government Cheese – Chronicling the collapse of democracy, because it belonged there.

“Trickle-down” thinking – the idea that “growth” is driven by the rich, not by regular people with money to spend – led to competition for the crumbs that fall off the table where the wealthy feast. Cut taxes & wages & regulations, then businesses and the wealthy will come to you. So other states/countries cut their taxes & wages & regulations even more to get them back. Soon the wealthy have everything.

Democracies Defunded

Democracies have been defunded by tax cuts and competing “trade” deals, and the .01% have literally all the wealth in the world. So the only way to keep things going is to try to get the rich to park their wealth with you in hope some of it might “trickle down.”

So you set up a tax-dodging haven to “compete’ with other tax-dodging havens. You will make THEM poor so you can get the few crumbs that fall off the table.

If You Tax Them They’ll Leave

Be warned, “If you tax them they’ll leave.” If they leave the crumbs won’t trickle down! Please give us a few crumbs, sir!!!!

Everything is “trickle down” now! Everyone is betting everything on hope “they” will “invest” some of the wealth they took and you’ll be able to have some infrastructure or education or healthcare… (Of course, “they” will be getting their “return” for that. So even more gets drained away. But that’s tomorrow and you are desperate today.)

Now It’s Turkey

Now Turkey is offering special tax dodging “incentives” to “compete” to get those with vast “undeclared” wealth to bring it there because, “Dubai and Abu Dhabi, recent magnets for international wealth, have been tested by the US war in Iran and localized attacks, shaking their status as regional safe havens.”

Turkey seeks to capitalise on strategic location to attract the rich from London & Dubai
Ankara recently announced it’s ushering in a range of tax incentives for monied expats and investors abroad.

“… Turkey is seeking to capitalize on its strategic location to attract more rich residents as instability hits rival wealth hubs from London to Dubai.

The country recently announced it’s ushering in a range of tax incentives for monied expats and investors abroad, ranging from minimal inheritance tax, the chance for 20 years of overseas income free from local levies and an amnesty program to bring in undeclared assets held overseas.

[. . .] The new policies arrive at a sensitive time for some rival finance centers. Dubai and Abu Dhabi, recent magnets for international wealth, have been tested by the US war in Iran and localized attacks, shaking their status as regional safe havens.”

Just read the rest. It’s disgusting. This has been going on so long that even imagining democracy and the idea that the public can be in charge of things is gone.

Give Wind & Solar Electricity To The Public For Free

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This post was first published at Imagine Democracy – Imagining government of the people, by the people and for the people.

If we had a functioning democracy we would own our energy supply. We would build publicly-owned solar & wind and provide the electricity to each other and our businesses for free. Our economy would BOOM.

We would tax & redistribute the highest incomes & profits that result from this. Healthcare, education, transportation…

Australia is starting to do this.

The Old Enemies Of Peace – Welcome Their Hatred

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This post first appeared at Imagine Democracy – Imagining government of the people, by the people and for the people.

In 1932 FDR campaigned asking for help so he could win and “restore America to its own people.” After taking office his administration began working to help the population start to recover from the ravages of depression caused by unregulated banks and stock market speculation. Campaigning for reelection in 1936 he delivered his final campaign speech at Madison Square Garden. He talked about the changes his government had made, and the struggle that lay ahead to continue with that struggle. He described the struggle he and the public faced, saying,

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

The old enemies of peace are back. Business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism and war profiteering.

Let’s welcome their hatred and send them off.

Crypto Crash – The Serious Money Is Betting Trump Will Fail

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This post first appeared at Government Cheese – Chronicling the collapse of democracy

The crypto crash means the “serious money people” are betting that Trump will fail.

When crypto started to become big money serious investors got involved. Serious investors do real analysis and usually know what they’re involved in. Sure, there are the dupes out there who think crypto has real “value.” But the real money in crypto comes from real investors putting millions into it and doing some degree of actual analysis of the risks.

Crypto’s only real use is crime. Its “use case” is ransomware, organized crime, bribery, fraud. With Trump there is the “rug-pull” fraud use case where you “issue” crypto coins, people place bets, and the issuer pulls the rug and cashes out. (Note – When you buy crypto you are giving crypto owners liquidity – backing the ability of criminals to cash out after their ransomware/bribery/whatever score.)

“Investing” in crypto is really just a bet on criming going up.

Crypto’s price went up and up because the real money made bets that Trump is going to be able to keep the crime racket going, even increasing it. They also believed the US government would step in and back it, buying up billions and maintaining its liquidity. A bet on crypto was a bet on Trump’s success at imposing a mafia state on the world.

So by pulling out and crashing the price, the “prediction market” of crypto – the big players – are betting that Trumpism isn’t going to succeed.

American Media Asymmetry

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There are things the American public just can’t be told. Here are a few examples.

Universal healthcare, like Medicare-for-All, would dramatically reduce American healthcare costs.

Cutting government spending usually just shifts costs onto the public or other government departments, and almost always increases those costs well beyond what was being spent before the cuts.

Immigrants are good for the economy — and also are human beings.

Taxing the rich to get money FROM the rich would mean the govt stops “borrowing” from the rich and forever after paying interest TO the rich. (It could also begin to address the problem of inequality if taxation levels are high enough.)

Renewables like wind and solar reduce energy costs while oil companies create life-threatening pollution and receive massive subsidies.

Joining a labor union brings tremendous benefits to workers. It increases their pay and benefits. It helps prevent mistreatment on the job.

These are just a few of the things you don’t hear in American “news” outlets.

The Real AI Question: Who Benefits?

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Here’s a different question about AI. Suppose it does what is promised, and does greatly increase productivity, and does bring all kinds of benefits. Who will gain from that? Will those benefits be shared? Will there be 3-day workweeks of 6 hours a day? 6-week vacations?

How Did Trade Work Out For Us?

Think about how it worked out with trade. Economists will explain that trade brings all kinds of benefits. One huge benefit was supposed to come from moving the worst jobs to places where people really need work, so the labor force is freed up to take on higher-level, higher-paid work, and the people on the other side of the trade border who needed jobs now have jobs. Over time this moves around the world lifting everyone. The same was supposed to be true about other benefits and gains from trade.

Democracies Would Make Sure Benefits Were Shared

But the economists assumed that everyone would benefit because democracies would make sure everyone shared those benefits. Why else would a democracy allow factories to close and imports to replace goods made at home? Why else would a democracy allow jobs to be sent away?

What Really Happened?

What really happened? The democracies were “captured” and instead of protecting the public government power protected the few at the top who had done the capturing. Jobs were moved out, factories were closed, and people were just laid off (too bad so sad here’s some Oxycontin). Unions were broken. Entire “rust belt” regions were utterly devastated. The middle class was forced downwards, while income and wealth shifted upward.

Here Comes AI

So now AI threatens to accelerate those changes. Democracy is gone and we all know the gains from AI won’t be shared. Instead AI will be used to force more and more people out of work, their wages instead going to a top few. This will further increase centralized power and wealth at the very top.

There Can Be Only One

This increasing concentration will accelerate and become a winner-take-all game. The oligarchs all understand this process of concentration, and are racing to be the winner in the AI race — to be the one person who gets it all. Literally all.

Hence the massive investment into AI we are seeing. Hence the bubble. It’s like nothing else matters.

Nothing Else Matters

It doesn’t matter to the massively-wealthy what happens when the bubble bursts. They understand this is about being the ONE person in control of what happens and who won’t be destroyed. They even say it – if AI becomes superintelligent they want to be the ONE person controlling that. And the current “system” is set up – by them – to let that happen.

That’s why they have rigged the system to keep We the People from stopping them.

American Manufacturing Was Sold Off For Profit

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China didn’t “take” America’s manufacturing jobs, greedy American investors and executives sold America’s farm and ate the seed corn. Same in the UK.

Paul Waldman writes about woodworking tools, in A Trump Tariff Case Study: Can the U.S. Again Be the Power Tool King? at The New Republic.

My DeWalt 20-volt cordless drill/driver combo set is a beaut—powerful, smooth, comfortable in the hand, and not too expensive; I got it on sale for about a hundred bucks. It’s also a tribute to the wonders of the transnational supply chain, its components traversing the earth before they came together and found their way to my door. The drill and driver were made in Mexico, but their batteries were made in China, as were the battery charger and the handy tote bag that came with it. DeWalt, a brand familiar to every woodworker and DIY enthusiast, is a division of Stanley Black & Decker, a global conglomerate headquartered in Connecticut that owns brands including Craftsman, Porter-Cable, Bostitch, and many others.

He writes about how tools once made in the US by American companies are now made elsewhere by international companies, why this is, and what it might take to bring the factories back. He nails it, just spot-on: Manufacturing ecosystems, the cost of bringing it back, the jobs that were good in the past. “(M)any started as American companies but are now part of multinational corporations.” “Unfortunately, there are serious impediments to achieving reindustrialization on a large scale, and Trump’s policies are just about the worst way to go about it.” “We could rebuild those manufacturing ecosystems in the U.S., but we can’t just wish it into existence.” “In fact, this entire debate seems animated by a vision of a bygone time.”

Yep, he nails it. And, as we all know, it’s not just woodworking tools. It’s the same story for … everything.

Same In The UK

It’s the same here in the UK as well. Jaguar/Land Rover are now owned by an Indian company. Trains, water, Royal Mail, British Petroleum (BP), British Telecom (BT) and many other iconic, privatized “British” brands are no longer British-owned. All were sold off to international “investor” conglomerates so a few already-wealthy people could get even more wealthy, under an economic “ideology” (free markets) that was really just a cover story for selling the farm and eating the seed corn. And the public, struggling to get by, now flails around hoping Trump (and here, the Trumpy Reform party) will make good on his promise to “fix it.”

China Did Not “Take” Those Industries

“China” (generic term for “somewhere else”) didn’t “take” those industries. American and British “investors” and executives did that – literally sold out their countries – enabled by US/UK governments run by politicians elected with money that those executives and “investors” took out of their companies to buy the politicians, so they could personally obtain great wealth. They did it because they wanted cheap labor and a way around the pollution and worker safety rules that democracies insist on.

“China” understood what they were seeing and planned and executed a strategy to build their industrial base – as a country. They set up manufacturing zones and put in place everything needed — from local financing, to a modern power grid, to roads, to training centers, to supply chains, to places for workers to come live. Everything.

It was a “public/private partnership” between American executives and the Chinese government. Those exectives also took that ecosystem apart in the US, piece by piece, and it can’t easily be put back together. They sent away the “institutional memory” and “ecosystem” of supply chains and training centers… much like how the Trumpers are now doing the same to the US government itself.

Beyond Neoliberalism

Last week I stepped back into a past life and attended the opening of the “Beyond Neoliberalism” conference (https://beyond-neoliberalism.org/) because it was literally right down the street here in Cambridge UK. Oddly America-centric (and attended by lots of Americans I used to know) it began with a rousing 2.5 hour panel discussion (mostly Americans) on Industrial Policy under Biden. They said a lot of the things you nailed down in your piece.

Biden tried with his IRA to the extent the “system” would let him. Obama tried in tiny ways with his Smart Manufacturing “hub” concept, setting up labs – like a sensor testing lab in Lorain, Ohio around community colleges that would train people to work in the labs, etc. Same with a 3-D printing hub in Youngstown.

They tried. They failed. Now the US has Trump and likely soon the UK will have Farage.

Where Did Everyone’s Money Go? (Hint: We Know)

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At the very end of the 1970s the US economy changed. An economic ideology called “neoliberalism” took hold. That was the idea that markets are a better way to decide things, not voters. The idea that “taxes on the rich hurt the economy” was blasted everywhere. Business does things more efficiently than government. Etc. (Tell me if you haven’t heard these things.)

So big changes were made in the way the US economy worked. Taxes on the rich and corporations were dramatically slashed. Companies were “unleashed” through deregulation. Unions were broken. Pensions disappeared. Etc.

Results appeared quickly. All of a suddent the gains from the economy stopped being shared, and increasingly went to the top few. Over the years I have posted versions of this chart:

Where The Money Went

A study from the Rand Corporation (a research organization) shows were the gains from the economy – as shown in that chart above – went. Rand’s Trends in Income From 1975 to 2018 concludes that around $79 TRILLION that would have gone to working people instead went to the top 1%. That was 2018, seven years ago. Worse now.

China Didn’t Take American Jobs

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Trump says other countries took advantage of the US. He says they “took” manufacturing and jobs from the US. This is just not what happened.

American Companies Did This

American democracy gave workers good wages and protections. It passed laws restricting the ability of companies to pollute.

“Investors” and executives running Amereican companies wanted more money. They wanted bigger profits, and saw America’s unions and resulting good wages and benefits as obstacles to greater profits – for themselves. They saw democracy’s protections and regulations and pollution controls as obstacles to greater profits – for themselves.

American investors and exeucites found a way around the borders of American democracy. The companies moved manufacturing to lowest-common-denominator places: lowest wages, minimal protection of workers, low regulation, allowing pollution etc. American companies did this, not evil foreign plots to take American jobs and companies.

The weaknesses of American democracy allowed American companies to move jobs out of the US. Those companies used this as a lever to force wages, taxes and regulations down INSIDE the US. This is a lot of what led to the inequality the US has now.

And they used the great profits to buy politicians who moved American democracy out of their way.

Foreigners didn’t do this to the US, American companies were allowed to do this.

THAT is what needs fixing. The weakness of American democracy, allowing government to be controlled by wealthy interests did this. The only way to undo this is to fully restore American democracy.

The Trump Tariffs

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This is the MAGA plan to re-align the world’s economy, of course with the US oligarchs on top. I see it as the product of the same arrogance as this famous quote:

‘That’s not the way the world really works anymore,’ he continued. ‘We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors…and you, all of you, will be left to just study what we do’.

The US got away with re-aligning the world economy in their favor when the opposition in the world was the USSR. Things are different now. China is strong. The EU is strong. I expect this now-famous quote tells us how this one is going to turn out for the US:

“I’m honestly shocked. I thought we had it in the bag,” said Pam Van Handel, chair of the Republican Party of Wisconsin’s Outagamie County. “I thought [Musk] was going to be an asset for this race. People love Trump, but maybe they don’t love everybody he supports. Maybe I have blinders on.”