Another wonderful piece where you showcase your ability to apply theory to the real world.
While I can sense the jubilation by “the Left” at Trump’s removal, I wonder if the changes we are witnessing feel so good only because we are comparing them to our expectations of another Trump term.
Specifically, does allowing inflation to run at, say, 2.3% for a few years constitute a radical break with neo-liberalism? While historically rising wages have been a driver of inflation, might the current global economic structure you have described mean an erosion of real wages under mild inflation?
Further, it seems that following the 2008 crisis where the Fed printed $1T, Congress “got wise” to the Fed’s Golden Goose and was prepared to ask for a larger slice of any future bail-out. This time around $3T was printed immediately and another $1.4T/yr ad infinitum. Congress wrangled $2T over several years. Might the comparison of “capital:labor” payoffs be $7T: $2T? Or, if you consider that US market cap doubled from $25T to $50T, maybe the ratio is 25:2?
This still looks, to me, primarily like “privatize the upside / socialize the downside”, but I sincerely hope your sense in correct.
Finally, the “classic” Presidential economic cycle has been to accept a recession early in your term so that you can stimulate going into the election. Trump violated this norm with massive corporate tax cuts upon gaining office. That didn’t help him and one might imagine how a multi-trillion dollar package in 2020 might have swayed people…
Might Biden (read, Harris) be making a similar tactical mistake? In four years, COVID will (hopefully) be a memory and the $2T stimulus almost certainly will be. Slow growth, continued class divides, and labor tax hikes in 2024 for Kamala? (I don’t think Biden is proposing undoing all of Trump’s corporate cuts.) Would she consider “reclaiming” some of the government’s largesse with a one-off wealth tax on households (and elite university endowments!)? Take a piece of the tech titan market cap? Challenge Musk’s Redeemer ethos? BitCoin? The wealth is there. Will the Harris lead the state and take it? Into an election? Against her power base?
Thanks Paul. I think you're right to suspect that what happens after the steroids are out of the system is a major risk for Democratic prospects in 2024. There has to be a smooth transition from the short-term solution to the recession to a long-term solution built around the energy transition that creates stable and well-paid working-class jobs over multiple electoral cycles. That's the only path forward for a renewed compact between social democracy and the working class — the only solution to the breakdown of elite-mass relations. Great risks remain on the books, however. Above all, it is quite possible that the class war could escalate with another confrontation of race relations.
I appreciate the amount of work you put into these posts. And freely acknowledge that pessimism and cynicism are often used as intellectually tinged cop-outs...
I appreciate your concerns. My post was provocatively optimistic by design. It was designed to stimulate this conversation by focusing attention on the main challenges, which usually seem to get lost in the cacophony of complaints. Happy to be at the receiving end of a whole bunch of skepticism, which I largely shared until literally yesterday.
While reading this, it reminded me of the idea of disjunctive presidents (https://www.nytimes.com/2019/05/15/opinion/trump-history-presidents.html). It'll be a decade before we know for sure, but it strikes me that if neoliberalism really did just die, then I think it's clear that Trump was a disjunctive president, with the disjunction Trump getting his party and America across being the collapse of neoliberalism.
Silly article. No reason to expect a coming economic boom (computers are becoming MORE expensive these days, not less). The work-from-home revolution is real for the top ranks, but is likely to result in only modest growth gains, mostly from companies hiring cheaper talent. No break with neoliberalism, either (China's and Europe's more marketized regions are growing faster than its state-led regions, or at least, that's the perception). The theories behind the whole post are also fatally flawed -monetary policy is unimportant in the long run. The one correct part about this post is that fiscal discipline is unlikely to come back into vogue for the next decade or so.
"Only when labor markets get very tight do working-class wages start growing as fast as middle class salaries."
No; not the case. Labor markets weren't very tight in the American 1950s. Also, there is no reason to expect the Fed to begin overshooting its target (though it would probably be a good thing if it did; higher inflation results in better policy than lower inflation).
You write: “The first intimations of a structural break with the old ways of thinking began to emerge in the discourse of the New American Left. Although it would later be taken over by antiracist activists unconcerned with the fortunes of the working-class, Bernie’s revolution was initially focused on bread and butter issues of everyday people.”
Can you say more about how you think antiracist activists perhaps took attention away from economic issues? What do you think a more fruitful role for them might be? You don’t think BLM, for instance, is also interested in greater economic security? I think they are but perhaps I’m overplaying my cards here. But I do think there’s not enough conversation, or recognition, that the interests of the black working class are similar to the lost opportunities that have faced the white working class for decades now.
I think that the antiracist left's hostility to class analysis become manifest when Adolph Reed Jr. was canceled. The greatest African-American intellectual alive was charged with 'class reductionism'. He is the intellectual inheritor of Christopher Lasch's mantle. You can find some of his writing here: https://nonsite.org/author/adolph-reed/.
Boasian antiracism emerged from the bowels of the Ivory Tower and retains that elite magnetism. Much of it is class signaling. Take the proliferation of acronyms. By using neologisms like BIPOC, one signals that one is read into the prestige school discourse. That automatically does class work, and is perceived to do class work by people outside the ambit of elite schools. Take Latinx. Turns out, it is really annoys people of Hispanic origin. I was not surprised to find predominantly Hispanic counties swing en masse to Trump in 2020.
There is an interiority to contemporary Boasian antiracism — the discourse is constantly self-referential. People who want to trace the Great Awokening to critical theory are on to something. But they fail to grasp the dominant feature of the revolution in attitudes towards race relations — that it is confined to the professional class. Indeed, most of what goes for intellectual discourse today is completely blind to social class. Once one starts paying attention to the inner, intellectual history of the social classes, it turns out that something altogether more interesting is going on than the rise of ideas from critical theory. See my https://policytensor.substack.com/p/the-origins-of-the-great-awokening.
There is no daylight between the interests of the black and white working-classes. In fact, precisely because black people are overrepresented in the working and underclasses and unrepresented in the middle, professional and upper classes, they have the most to gain from policies that benefit the lower classes. I think it is crucial to grasp the class systematics of the present day United States. I took a stab at it here: https://policytensor.substack.com/p/the-5-social-classes-in-america.
Exactly how do these "overrepresented" black people benefit? They make the least amount of money yet pay in very similar tax wages as middle and upper class. They have less access to affordable housing, education, healthcare AND when they try and speak up about these inequalities they are shit or abuse ny the police, given ridiculous bonds so they sit in jail for much longer amounts of time than their white counterparts. They are also less likely to face a "jury of their peers" seeing as how the majority of juries are made up of middle aged white men
Downsizing the casino financial sector to its normal functional role in the economy will take a host of policies, more than a suspension of the Phillip's Curve mentality. In the 1950s there was a policy of "financial repression", there was Regulation Q. The short-term capital gains rule could be much more punitive to casino activity. Price controls until corporate profits drop to their historical averages could be used. We have broadly spread "material hardship", between 40 to 50% of the nation's households, and inducing inflation may be difficult with such a drop in income share sustained by the lower 90%. The RAND Corp. report "Income Trends from 1975 to 2018" claims a 17% of national income shift, from the lower 90 to the top 10, which amounts to a $3.7 trillion shift. Running a hot economy is needed, but it should be accompanied with attention to the forces that will try to over-charge, or shift expenses to slave labor economies. An economic nationalism may be the mentality needed.
Great essay. Question for you. I don't doubt that the Fed can combat inflation. However, it seems like the Fed often needs the support of the administration. For instance, lumber prices are up about 400% over the previous 18 months. The Fed can't do much about that, but the administration can. Do you anticipate cooperation?
What I don't understand is the Fed is keeping the IOER higher than the fed funds rate, so banks are making more money off interest from the fed than actually lending to businesses and private individuals...which this may be a basic question...but WHY? Everything is getting heated because small or new business can't grow because they aren't getting adequate funding from anywhere...OR the feds are forcing businesses to borrow from the gov't. The issue though is the loans for businesses are way to particular and don't ever fall in line with government regulations to even get one. If you fail with a private bank you bankrupt, if you fail with the gov't you go to prison...
“banks are making more money off interest from the fed than actually lending to businesses and private individuals” - consumer and business lending rates are higher than IOER.
I would not call what is happening a policy shift, or an abandonment of the neoliberal consensus, so much as events reflect a recognition that the neoliberal candidate in the United States barely squeaked out an election win against a raging incompetent.
Even though Biden had a massive advantage in campaign spending and he had the MSM and Big Tech openly working on his behalf, if a few thousand votes in AZ, GA and PA had gone the other way, Trump would still be president. For that matter, if Trump had made even a half-hearted attempt to enact his 2016 agenda, or if he had pretended to act like he cared about the effects of COVID on the average frustrated chump, he might well have won in spite of everything.
In other words, I don't think any paradigms have shifted, so much as the technocrats recognized that the masses are seething with white hot incandescent rage, so they might want to toss the great unwashed a crumb or two, lest they up and vote for another doofus like Trump.
When are people going to acknowledge that more than one thing can happen at a time. The culture war is both independent and interactive with the class war and scholarship of the last several decades has long understood this. Talk about rigidity: the idea that everything but class is a superstructure chimera and nothing more is really the creakiest idea of them all.
It just isn't true that working class all went culture war due to the class war. Mainly cultural conservatives did that, and most of them were whites. What about non-whites and liberal whites who are in similar situations but did not buy into far right cultural thinking and voting? Who didn't buy into "coastal elite" talk and voted Biden in? Who know that politics is a messy game, and knowledge is hard to come by? Why don't they get credit for seeing clearly?
Fed isn't able to get money flowing to rural areas. Congress used to do it with earmarks. When Congress banned earmarks, the Fed should've picked up the slack by purchasing municipal bonds. Would allow the Fed to pursue full employment in the rust belt, for example, without inflating stocks or a housing bubble in cities.
BTW, you might like "Trade Wars are Class Wars" by Michael Pettis. Also, some of the decline in middle-class living standards is to due to chronically tighter property zoning (a sort of neither here nor there proposition, but important).
These "green tech" investment themes are always very interesting. So, we will "lose money on every sale but make it up in volume". Losing money can't go on forever, as Dr. Stein so noted: “If something cannot go on forever, it will stop,”.
The author has obviously never done anything of significance in the real economy.
Another wonderful piece where you showcase your ability to apply theory to the real world.
While I can sense the jubilation by “the Left” at Trump’s removal, I wonder if the changes we are witnessing feel so good only because we are comparing them to our expectations of another Trump term.
Specifically, does allowing inflation to run at, say, 2.3% for a few years constitute a radical break with neo-liberalism? While historically rising wages have been a driver of inflation, might the current global economic structure you have described mean an erosion of real wages under mild inflation?
Further, it seems that following the 2008 crisis where the Fed printed $1T, Congress “got wise” to the Fed’s Golden Goose and was prepared to ask for a larger slice of any future bail-out. This time around $3T was printed immediately and another $1.4T/yr ad infinitum. Congress wrangled $2T over several years. Might the comparison of “capital:labor” payoffs be $7T: $2T? Or, if you consider that US market cap doubled from $25T to $50T, maybe the ratio is 25:2?
This still looks, to me, primarily like “privatize the upside / socialize the downside”, but I sincerely hope your sense in correct.
Finally, the “classic” Presidential economic cycle has been to accept a recession early in your term so that you can stimulate going into the election. Trump violated this norm with massive corporate tax cuts upon gaining office. That didn’t help him and one might imagine how a multi-trillion dollar package in 2020 might have swayed people…
Might Biden (read, Harris) be making a similar tactical mistake? In four years, COVID will (hopefully) be a memory and the $2T stimulus almost certainly will be. Slow growth, continued class divides, and labor tax hikes in 2024 for Kamala? (I don’t think Biden is proposing undoing all of Trump’s corporate cuts.) Would she consider “reclaiming” some of the government’s largesse with a one-off wealth tax on households (and elite university endowments!)? Take a piece of the tech titan market cap? Challenge Musk’s Redeemer ethos? BitCoin? The wealth is there. Will the Harris lead the state and take it? Into an election? Against her power base?
Thanks Paul. I think you're right to suspect that what happens after the steroids are out of the system is a major risk for Democratic prospects in 2024. There has to be a smooth transition from the short-term solution to the recession to a long-term solution built around the energy transition that creates stable and well-paid working-class jobs over multiple electoral cycles. That's the only path forward for a renewed compact between social democracy and the working class — the only solution to the breakdown of elite-mass relations. Great risks remain on the books, however. Above all, it is quite possible that the class war could escalate with another confrontation of race relations.
I appreciate the amount of work you put into these posts. And freely acknowledge that pessimism and cynicism are often used as intellectually tinged cop-outs...
I appreciate your concerns. My post was provocatively optimistic by design. It was designed to stimulate this conversation by focusing attention on the main challenges, which usually seem to get lost in the cacophony of complaints. Happy to be at the receiving end of a whole bunch of skepticism, which I largely shared until literally yesterday.
Agreed that the Fed's belated empirical turn away from the Phillips curve is good news. At least now I know how I'm investing.
Aside: if you decide to sell merchandise, you could do this under the heading
"Policy Tensor Products."
Sounds great, assuming that we reach full employment so all the little people can feel it before the next election. So doubtful.
I hope you are right!
While reading this, it reminded me of the idea of disjunctive presidents (https://www.nytimes.com/2019/05/15/opinion/trump-history-presidents.html). It'll be a decade before we know for sure, but it strikes me that if neoliberalism really did just die, then I think it's clear that Trump was a disjunctive president, with the disjunction Trump getting his party and America across being the collapse of neoliberalism.
Oh yeah. Edsall's great. He once quoted me in his column. So the Policy Tensor's appeared on the pages of record! https://www.nytimes.com/2019/10/09/opinion/democrats-2020.html
Sick!!
Could be that the centrist consensus know just how fragile it is at the moment.
Time to toss the peasants a few crumbs.
Silly article. No reason to expect a coming economic boom (computers are becoming MORE expensive these days, not less). The work-from-home revolution is real for the top ranks, but is likely to result in only modest growth gains, mostly from companies hiring cheaper talent. No break with neoliberalism, either (China's and Europe's more marketized regions are growing faster than its state-led regions, or at least, that's the perception). The theories behind the whole post are also fatally flawed -monetary policy is unimportant in the long run. The one correct part about this post is that fiscal discipline is unlikely to come back into vogue for the next decade or so.
"Only when labor markets get very tight do working-class wages start growing as fast as middle class salaries."
No; not the case. Labor markets weren't very tight in the American 1950s. Also, there is no reason to expect the Fed to begin overshooting its target (though it would probably be a good thing if it did; higher inflation results in better policy than lower inflation).
As best I can tell this “boom” has led to significantly higher inequality and housing costs. Consider me unimpressed.
Millenials need cheaper housing/college, and rising real wages. We’ve given them the opposite and let them day-trade btc and spacs as a distraction.
I’ll consider this just another upward-redistribution “boom” until I see us get serious about housing costs for starters.
You write: “The first intimations of a structural break with the old ways of thinking began to emerge in the discourse of the New American Left. Although it would later be taken over by antiracist activists unconcerned with the fortunes of the working-class, Bernie’s revolution was initially focused on bread and butter issues of everyday people.”
Can you say more about how you think antiracist activists perhaps took attention away from economic issues? What do you think a more fruitful role for them might be? You don’t think BLM, for instance, is also interested in greater economic security? I think they are but perhaps I’m overplaying my cards here. But I do think there’s not enough conversation, or recognition, that the interests of the black working class are similar to the lost opportunities that have faced the white working class for decades now.
I think that the antiracist left's hostility to class analysis become manifest when Adolph Reed Jr. was canceled. The greatest African-American intellectual alive was charged with 'class reductionism'. He is the intellectual inheritor of Christopher Lasch's mantle. You can find some of his writing here: https://nonsite.org/author/adolph-reed/.
Boasian antiracism emerged from the bowels of the Ivory Tower and retains that elite magnetism. Much of it is class signaling. Take the proliferation of acronyms. By using neologisms like BIPOC, one signals that one is read into the prestige school discourse. That automatically does class work, and is perceived to do class work by people outside the ambit of elite schools. Take Latinx. Turns out, it is really annoys people of Hispanic origin. I was not surprised to find predominantly Hispanic counties swing en masse to Trump in 2020.
The traditional concern of the left with the welfare of the working class survives on the margins of the antiracist left. But it is perched precariously next to an altogether much bigger phenomenon: the rise of Boasian antiracism as the hegemonic ideology of the professional class. See my https://policytensor.substack.com/p/what-in-the-name-of-the-lord-is-boasian-antiracism. It now functions as a discourse of class oppression. The central premise of the paradigm is that the white working-class is racist. It is an assumption that is uniformly accepted in the professional class but has no basis in empirical reality. See my https://policytensor.substack.com/p/notes-on-the-myth-of-working-class-racism-1 and https://policytensor.substack.com/p/notes-on-the-myth-of-working-class-racism-2.
There is an interiority to contemporary Boasian antiracism — the discourse is constantly self-referential. People who want to trace the Great Awokening to critical theory are on to something. But they fail to grasp the dominant feature of the revolution in attitudes towards race relations — that it is confined to the professional class. Indeed, most of what goes for intellectual discourse today is completely blind to social class. Once one starts paying attention to the inner, intellectual history of the social classes, it turns out that something altogether more interesting is going on than the rise of ideas from critical theory. See my https://policytensor.substack.com/p/the-origins-of-the-great-awokening.
There is no daylight between the interests of the black and white working-classes. In fact, precisely because black people are overrepresented in the working and underclasses and unrepresented in the middle, professional and upper classes, they have the most to gain from policies that benefit the lower classes. I think it is crucial to grasp the class systematics of the present day United States. I took a stab at it here: https://policytensor.substack.com/p/the-5-social-classes-in-america.
Exactly how do these "overrepresented" black people benefit? They make the least amount of money yet pay in very similar tax wages as middle and upper class. They have less access to affordable housing, education, healthcare AND when they try and speak up about these inequalities they are shit or abuse ny the police, given ridiculous bonds so they sit in jail for much longer amounts of time than their white counterparts. They are also less likely to face a "jury of their peers" seeing as how the majority of juries are made up of middle aged white men
Downsizing the casino financial sector to its normal functional role in the economy will take a host of policies, more than a suspension of the Phillip's Curve mentality. In the 1950s there was a policy of "financial repression", there was Regulation Q. The short-term capital gains rule could be much more punitive to casino activity. Price controls until corporate profits drop to their historical averages could be used. We have broadly spread "material hardship", between 40 to 50% of the nation's households, and inducing inflation may be difficult with such a drop in income share sustained by the lower 90%. The RAND Corp. report "Income Trends from 1975 to 2018" claims a 17% of national income shift, from the lower 90 to the top 10, which amounts to a $3.7 trillion shift. Running a hot economy is needed, but it should be accompanied with attention to the forces that will try to over-charge, or shift expenses to slave labor economies. An economic nationalism may be the mentality needed.
Great essay. Question for you. I don't doubt that the Fed can combat inflation. However, it seems like the Fed often needs the support of the administration. For instance, lumber prices are up about 400% over the previous 18 months. The Fed can't do much about that, but the administration can. Do you anticipate cooperation?
What I don't understand is the Fed is keeping the IOER higher than the fed funds rate, so banks are making more money off interest from the fed than actually lending to businesses and private individuals...which this may be a basic question...but WHY? Everything is getting heated because small or new business can't grow because they aren't getting adequate funding from anywhere...OR the feds are forcing businesses to borrow from the gov't. The issue though is the loans for businesses are way to particular and don't ever fall in line with government regulations to even get one. If you fail with a private bank you bankrupt, if you fail with the gov't you go to prison...
“banks are making more money off interest from the fed than actually lending to businesses and private individuals” - consumer and business lending rates are higher than IOER.
I would not call what is happening a policy shift, or an abandonment of the neoliberal consensus, so much as events reflect a recognition that the neoliberal candidate in the United States barely squeaked out an election win against a raging incompetent.
Even though Biden had a massive advantage in campaign spending and he had the MSM and Big Tech openly working on his behalf, if a few thousand votes in AZ, GA and PA had gone the other way, Trump would still be president. For that matter, if Trump had made even a half-hearted attempt to enact his 2016 agenda, or if he had pretended to act like he cared about the effects of COVID on the average frustrated chump, he might well have won in spite of everything.
In other words, I don't think any paradigms have shifted, so much as the technocrats recognized that the masses are seething with white hot incandescent rage, so they might want to toss the great unwashed a crumb or two, lest they up and vote for another doofus like Trump.
Sorry, repeat comment. Bad cat!
When are people going to acknowledge that more than one thing can happen at a time. The culture war is both independent and interactive with the class war and scholarship of the last several decades has long understood this. Talk about rigidity: the idea that everything but class is a superstructure chimera and nothing more is really the creakiest idea of them all.
It just isn't true that working class all went culture war due to the class war. Mainly cultural conservatives did that, and most of them were whites. What about non-whites and liberal whites who are in similar situations but did not buy into far right cultural thinking and voting? Who didn't buy into "coastal elite" talk and voted Biden in? Who know that politics is a messy game, and knowledge is hard to come by? Why don't they get credit for seeing clearly?
Fed isn't able to get money flowing to rural areas. Congress used to do it with earmarks. When Congress banned earmarks, the Fed should've picked up the slack by purchasing municipal bonds. Would allow the Fed to pursue full employment in the rust belt, for example, without inflating stocks or a housing bubble in cities.
I am glad you are writing, so I don't have to.
BTW, you might like "Trade Wars are Class Wars" by Michael Pettis. Also, some of the decline in middle-class living standards is to due to chronically tighter property zoning (a sort of neither here nor there proposition, but important).
These "green tech" investment themes are always very interesting. So, we will "lose money on every sale but make it up in volume". Losing money can't go on forever, as Dr. Stein so noted: “If something cannot go on forever, it will stop,”.
The author has obviously never done anything of significance in the real economy.