Friday, May 6, 2016

How Has The "Model" Free Trade Agreement with Korea Worked Out?

Free trade agreements, like neoliberal economic policy, are faith-based policies that are promoted by both the business interests that benefit from them and economic policy-makers captured by the ideology of mainstream economic thought, in spite of the overwhelming evidence for their negative consequences (for the larger economy and the working population).

Obama has been working overtime in support of the Trans Pacific Partnership (TPP) but as reported by Lori Wallach of Public Citizen’s Global Trade Watch, there is now more damning evidence for the utter misinformation (lie?) about these trade agreements.

“Today’s alarming fourth-year trade data on President Obama’s U.S.-Korea Free Trade Agreement (FTA) arrived just as the Obama administration has started its hard sell to pass the Trans-Pacific Partnership (TPP). And that is a real problem for the White House.

The Korea deal served as the U.S. template for the TPP, with significant TPP text literally cut and pasted from the Korea agreement. And the Obama administration sold the Korea deal with the same “more exports, more jobs” promises now being employed to sell TPP.

And since then, our trade deficit with Korea more than doubled as imports surged and exports declined. The increase in the U.S. trade deficit with Korea equates to the loss of more than 106,000 American jobs in the first four years of the Korea FTA, counting both exports and imports, according to the trade-jobs ratio that the Obama administration used to promise at least 70,000 job gains from the deal.”

Thursday, April 28, 2016

Fallacious Logic Informs St Johns River Dredging Project

The most recent development in the ongoing contention over the proposed St Johns River dredging/deepening has the St Johns Riverkeeper filing a legal challenge to block state permitting of the project. While much of the debate over the project has revolved around the environmental impact, and the classic tradeoff between environmental protection and economic growth, there is an even more fundamental question worth asking -- what is the likelihood that the presumed economic gains in jobs and revenue will be realized if the project actually comes to fruition? On that score, one can file a logical challenge against the project and its proponents who repeatedly commit a fundamental logical socio-economic fallacy known as “the fallacy of composition”.

This logical fallacy plagues many proposed economic development panaceas. The tendency is to isolate a single case, in this instance Jacksonville’s port, showing how investing in an infrastructural enhancement will make the port more competitive and result in positive economic benefits. But what appears as individually rational -- for a port to seek public funds in order to finance infrastructural expansion and meet the demands of carriers and shippers – may in fact be collectively irrational. This is because Jaxport is not the only port engaging in this activity. Every major port on the East coast is or will be as deep, or deeper, than Jacksonville. Once one considers the larger east coast port population, all pursuing the same strategies and competing for the same limited amount of containerized cargo, it should be obvious that the result will not be equally beneficial for all parties. Some will be more successful than others based on existing and cumulative advantages; and, collectively, scarce public funds will be expended on redundant infrastructure resulting in overcapacity and underutilization.

Avoiding the fallacy of composition would have led the Army Corp of Engineers to conduct a multiport analysis in determining the wisdom of recommending the St Johns River dredging/deepening project (but they did not). Understanding the fallacy of composition would make clear that when every port seeks to gain an advantage through costly infrastructure and channel deepening it will inevitably result in “destructive competition” where no net competitive advantage is gained by any port, while the bargaining position of the shippers and global carriers is strengthened. As one study of port competition concludes: “…interport competition results in an unnecessary and unrewarded transfer of wealth from local taxpayers and users to global firms.”

There is a second similarly relevant socio-economic fallacy known as Say’s Law -- that supply will create its own demand. This has been translated into the equally fallacious assumption made by advocates of the deepening project that “if we dredge, they will come”. But supplying a container terminal and deep water will not automatically produce a demand for port services, as that is contingent not only on the state of global trade but decisions made by the shippers and carriers, who, it turns out, have expressed a clear preference for Savannah and Charleston over Jacksonville.

Finally, one would be remiss if they did not make reference to the more well-known concept of “opportunity cost”. This refers to the lost benefit or value of an activity not undertaken because another course of action is pursued. As it pertains to the river deepening, one might consider whether the estimated $400 million local share of total project cost would be better directed toward an alternative form of public investment that might generate greater benefits for the citizens of Duval county, such as improved public transportation.

In short, one does not need to conduct a technical econometric analysis in order to assess or challenge the logical shortcomings of the proposed dredging project. It is remarkable, but not entirely surprising, that paid consultants conducting economic impact studies would overlook these fundamental, but inconvenient, socio-economic principles. What will be more inexcusable is if public officials actually decide to expend scarce taxpayer resources, in a time of severe fiscal strain, on such a highly speculative megaproject.

Friday, April 22, 2016

Jacksonville Oligarchy

The pattern of autocratic candidate selection should now be depressingly familiar to the citizens of Jacksonville. A political office opens up; a narrow wealthy elite segment of the population, or usually just one single member of the elite known as the “local kingmaker”, endorses a candidate; said candidate immediately becomes the odds on favorite to capture the election, and invariably emerges victorious.

The wishes and desires of the demos – that is, the participation of the people on whom democracy presumably rests – play absolutely no role in this process. We saw this with the endorsement of Mayor Brown, the anointment of Mayor Curry, and now it is playing out with lightening quick speed in the open 4th Congressional seat recently vacated by Ander Crenshaw. Former Sheriff John Rutherford has been chosen by the local powers that be. Case closed; citizens and democracy be damned.

More disturbing still, no one seems to care. Compare this with Hong Kong where recently tens of thousands of people hit the streets to protest the role of the Chinese Communist Party selecting acceptable candidates for their Chief Executive position. What we have in the United States generally, and in Jacksonville in particular, is comparable. Instead of a political elite, it is a corporate elite. But here in Jacksonville, as elsewhere, there is hardly a word of dissent as citizens have become habituated to the faux democracy that is our electoral political system.

Regarding the chosen candidate, there has been nothing said about the qualities Rutherford possesses that would recommend him as a member of Congress. Not a word on his policy positions on national issues, his aspirations, or his ideals. Apparently, the local oligarchy is content that he will represent their interests; but what about the interests of the congressional district’s larger constituency?

It is time that citizens demand a more democratic process and procedure for determining who will be on the ballot, and the choices they will be faced with when they vote for their Congressional representative.

Democrats vs Democrats

In Thomas Frank’s excellent latest book, Listen Liberal, on the conservative drift of the Democratic Party he highlights the fact that the party has largely devoted itself toward mobilizing and serving the interests of the professional-managerial class rather than the working class. More specifically, he notes the party’s fascination with highly educated professionals, the “creative class”, and the associated concept of innovation (technological and financial, the latter responsible for blowing up the economy). 

The growing rift between average workers and privileged professionals, and the Democratic Party preference for the latter (formerly known as "Atari Democrats"), emerged in full view in Silicon Valley as the Democratic Party was pandering to the venture capitalists, who happen to have the campaign contribution largess the party has come to crave. ​

After working in Silicon Valley for years, Morgan Quirk felt good protesting outside the home of a venture capitalist who funded tech startups and fundraisers for Hillary Clinton. He was part of a new splinter group of the liberal party, Democrats marching against Democrats in San Francisco, commuting tech workers against their bosses.

“They sell you a dream at startups – the pingpong, the perks – so they can pull 80 hours out of you,” said Quirk, a 26-year-old software engineer. “But in reality the venture capitalists control all the capital, all the labor, and all the decisions, so yeah, it feels great protesting one.

Sunday, March 20, 2016

Trump and the Double Backlash Boomerang

The rise of Donald Trump has generated a range of explanations for his electoral appeal. The most convincing explanations link his success to the actions and rhetoric that has been coming from the Republican Party since at least the 1990s.  A more accurate description of this dynamic might be what I refer to as the “double backlash boomerang”. It is a two-step process, with “Trumpenstein” as the end product.

The first backlash was identified most poignantly by Thomas Frank who introduced us to “The Great Backlash” with his book What’s The Matter With Kansas. Frank described how the Republican Party, unable to attract naturally the white working class on economic issues given their pro-corporate agenda and country club constituency, resorted to cultural appeals that painted the liberals, and by association the Democratic Party, as arrogant and condescending elitists who look down upon the working-class masses with disdain for their attachment to God, guns, and traditional family values.  Portrayed by Republicans as secular humanists intent on social engineering through government policies aimed at curtailing basic freedoms and liberty, liberals are more concerned with undeserving minority groups and immigrants than hard-working, God-fearing, Christians. This rhetoric served to both anger and mobilize a significant portion of the working class against the Democratic Party and in support of the Republicans.  

What Pat Buchanan termed the “culture wars” has now become the routine, standard operating, Republican strategy of “stirring up the base”. Most recently it has involved increasingly outrageous charges against liberals who, it is claimed, are destroying the country from the inside. This strategy was ramped up further during the Obama administration, with the ever-present and not so subtle racist overtones, in the form of questioning Obama’s citizenship and his sympathies, and charging him with being a foreign agent and a communist dictator.  The Tea Party movement, cultivated and funded by the Koch brothers, was the most visible manifestation of this “ginned-up” base.  This described the first backlash, which has been fairly successful in fueling Republican electoral support among a segment of the white working class. 

But the ultimate electoral purpose was to advance the economic agenda of the corporate elite. As Frank argues: “Cultural anger is marshaled to achieve economic ends. And it is these economic achievements — not the forgettable skirmishes of the never-ending culture wars — that are the movement’s greatest monuments. The backlash is what has made possible the international free-market consensus of recent years, with all the privatization, deregulation, and de-unionization that are its components. Backlash ensures that Republicans will continue to be returned to office even when their free-market miracles fail and their libertarian schemes don’t deliver…”

And any chance that the culturally wooed working class would return to the Democratic Party is undermined by the fact that the Democrats, for their part, are equally complicit in joining the “free market consensus”.  This neoliberal economic agenda introduced under Reagan, privileging the needs of capital over labor through lower taxes, weaker unions, deregulation, and a far less generous welfare state, was deepened and normalized under Clinton (see NAFTA, welfare reform, repeal of Glass-Steagall), continued with a vengeance under Bush II, and largely left in place unabated by Obama despite its direct role in creating The Great Recession that he inherited.  The neoliberal consensus, driven by the bipartisan addiction to corporate campaign contributions, has left the working class with no party representing their interests.  Instead of a class-based appeal through alternative pro-labor economic policies, which would alienate their corporate backers, the Democratic Party has developed a codependent relationship with the Republicans using their own cultural and identity politics to attract the educated white-collar professional-managerial class who is likewise mobilized in opposition to the crude and intolerant cultural values advanced by the Republicans.   

Abandoning the working class, as Frank puts it, has been the “criminally stupid strategy that has dominated Democratic thinking” since the 1970’s.      

So as the 2016 primary season kicked off, you have the mass base of the Republican Party ginned-up and angry, continuing to suffer economically, unable to turn to the now-despised liberal Democrats, yet wanting to “Take Back America”.  But they do not see the Republican establishment responding proportionately to the purportedly grave threat to the American way of life posed by Obama and the Democratic Party. If everything they have been told by Republican politicians and Fox News is true, how come the Republican Party has not taken the drastic actions required to stop and halt the clear and present danger? Instead, the Republican establishment, despite the incendiary rhetoric, is perceived as too willing to accommodate and compromise with, rather than aggressively attack, the identified source of American decline. 

Thus, the second backlash is unleashed as the base turns, en masse, toward a Donald Trump, in hostile opposition to the Republican Party institution, with Trump promising, through appeals to cultural chauvinism and economic nationalism, to “Make America Great Again.”

Originally fueled by the first Great Backlash, we are witnessing more broadly the boomeranging blowback from years of cultivating dog whistle racism, misogyny, xenophobia, bellicose nationalism, anti-intellectualism, know nothingism, and generalized rage.  In short, the Republican Party has spawned a custom-made constituency for the neo-fascist demagoguery of Donald Trump.  

Monday, January 18, 2016

What Would Martin Luther King Jr. Think Today (annual post)

If Martin Luther King Jr. were alive today I believe he would be deeply disturbed at the socio-economic condition and policy direction of the United States in both domestic and international affairs. 

More specifically, he would be appalled that our global response to 9/11 was war, invasion, and occupation; that our domestic response to 9/11 was a so-called Patriot Act curtailing civil liberties; that our current military strategy employs targeted killing using unmanned drones; that in spite of record rates of child and family poverty our “leaders” are unable to utter the p-word; that in the midst of the worst economic crisis since the great depression there is a greater concern with cutting deficits than creating jobs; that in spite of record income inequality, raising taxes on the rich is fiercely resisted while busting labor unions is embraced; that in response to the endless string of mass shootings many Americans have chosen to stock up on additional weapons;  that in response to a failing economy that systematically marginalizes racial minorities we have chosen prisonfare over welfare, the dragnet over the safety net, police violence over public safety; that the United States is the global arms merchant; and that rather than deepening democracy we have established a corporate plutocracy.

But Martin Luther King would not despair; he would organize. If alive today he would have supported the Occupy and Black Lives Matter movements and would mobilize citizens in peaceful, non-violent action to agitate against existing conditions while building a vision for a more humane world.

Wednesday, October 14, 2015

Deficits, the Laffer Curve, and Jeb's 'Deja Voodoo'

There was a time when Republicans were known as the frugal party that obsessed over deficits and balanced budgets. As the sociologist Mark Mizruchi writes, in his outstanding historical study of the corporate elite during what he believes was the period of corporate moderation and pragmatism from the post-WWII period into the 1960s, “The interesting feature here is the groups willingness to acknowledge that spending cuts could not be viewed as the sole solution to the deficit without at least some level of tax increase…this contrasts with the American business community of the post-2000 period, which has been unwilling to even raise the possibility of a tax increase, despite a deficit far greater in magnitude than that experienced during the 1960s.”

But one can pre-date the shift in ideology back to the 1980s when Reagan proposed sharp tax cuts for the rich. These proposed tax cuts posed a serious dilemma for Republicans who, on the one hand, loved low taxes, particularly in the upper brackets and on corporate profits but, on the other hand, were concerned with deficits.  At that time there was recognition of the positive relationship between tax rates and tax revenue (the laft-hand half of the curve below).

The Laffer (laugher?) curve, presumably originally drafted on a cocktail napkin, was designed to show that the Republicans could have their cake and eat it too. The purely hypothetical curve showed how lower tax rates could actually increase revenue on the assumption that it would stimulate such an outburst of new investment that the resulting increase in growth, and the taxes that this growth would yield, would more than compensate for the lower tax rates.  This was famously described by GHW Bush as “voodoo economics.” But it today remains the foundation for the logic of supply-side economics and the trickle-down/rising-tide-lifts-all-boats fraud.

Every time it has been tried, during the Reagan years, during the GW Bush years, and most recently by Governor Brownback in Kansas, it has produced exactly what one would logically expect – massive budget deficits.

This brings us to Presidential candidate Bush III (aka Jeb!). He has recently proposed a tax plan that is nothing more than warmed over supply-side doctrine with lower tax rates for the top bracket and corporations as the presumed solution to slow growth.  In an interview, Jeb was told that economists, who had evaluated his tax plan, predicted a loss of revenue into the trillions. In response, Jeb simply parroted the bankrupt and empirically unsubstantiated supply side mantra based on the Laffer Curve :
“Lower taxes will create a renaissance of investment in our country…the dynamic effect of growth will create far more revenue than any of the exotic tax plans that are being proposed by the left…the dynamic effect of tax policy creates economic growth that narrows the deficit.”

Yes -- in the words of the economist Robert Kuttner --  another case of deja voodoo!