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Jihad vs McWorld & the Incoherence of Economic Liberty

June 22, 2012

McWages. The conversion rate of some 60 countries with McDonald’s restaurants and how much their employees get paid – converted to Bic Mac’s Per Hour. Truly a horrifying idea.

“There are three obvious, dramatic conclusions… First, the developed countries, including the US, Canada, Japan, and Western Europe have quite similar wage rates, whether measured in dollars or in BMPH. In these countries a worker earned between 2 and 3 Big Macs per hour of work…  A second conclusion is that the vast majority of workers, including those in India, China, Latin America, and the Middle East earned about 10% as much as the workers in developed countries, although the BMPH comparison increases this ratio to about 15%, as would any purchasing-power-price adjustment. Finally, workers in Russia, Eastern Europe, and South Africa face wage rates about 25 to 35% of those in the developed countries, although again the BMPH comparison increases this ratio somewhat. In sum, the data in Table 3 provide transparent and credible evidence that workers doing the same tasks and producing the same output using identical technologies are paid vastly different wage rates.”

In my head, much of this is less than obvious… But just the idea of converting your wages into Big Mac’s should give you pause.

Reminds me of my first ever course in “political economy,” and this article on Jihad versus McWorld. This is still a pretty good read, even 20 years later:

Just beyond the horizon of current events lie two possible political futures—both bleak, neither democratic. The first is a retribalization of large swaths of humankind by war and bloodshed: a threatened Lebanonization of national states in which culture is pitted against culture, people against people, tribe against tribe—a Jihad in the name of a hundred narrowly conceived faiths against every kind of interdependence, every kind of artificial social cooperation and civic mutuality. The second is being borne in on us by the onrush of economic and ecological forces that demand integration and uniformity and that mesmerize the world with fast music, fast computers, and fast food—with MTV, Macintosh, and McDonald’s, pressing nations into one commercially homogenous global network: one McWorld tied together by technology, ecology, communications, and commerce. The planet is falling precipitantly apart AND coming reluctantly together at the very same moment.

Another way to look at Private Prisons (McWorld). This always makes me sick to my stomach. To take away our fellow citizen’s freedoms, liberty and (sadly) most of their basic human rights, should simply not be done “for profit.” That is a governmental function – one that should be monitored and double checked at every turn, and never ever ever ever should there be perverse economic incentives attached to mass incarceration.

So what’s really behind the drive to privatize prisons, and just about everything else?

One answer is that privatization can serve as a stealth form of government borrowing… We hear a lot about the hidden debts that states have incurred in the form of pension liabilities; we don’t hear much about the hidden debts now being accumulated in the form of long-term contracts with private companies hired to operate prisons, schools and more.

Another answer is that privatization is a way of getting rid of public employees, who do have a habit of unionizing and tend to lean Democratic in any case.

But the main answer, surely, is to follow the money. Never mind what privatization does or doesn’t do to state budgets; think instead of what it does for both the campaign coffers and the personal finances of politicians and their friends. …

Book review.  Same sad tale of Wall Street insiders staffing key government economic positions. Welcome to the High-Finance branch of McWorld.

Scheiber’s book, then, is a dispiriting story both of how Wall Street’s influence on Democrats allowed it to escape paying any appropriate price for the mayhem it inflicted, while escaping effective regulation, and of how Obama failed to confront intransigent Republicans. But what made the Republicans so intransigent? That, in different ways, is the subject of two recent books: Thomas Frank’s Pity the Billionaire and Thomas Edsall’s The Age of Austerity.

Frank focuses on what is, as he says, “something unique in the history of American social movements: a mass conversion to free-market theory as a response to hard times.” It is indeed remarkable. After all, for three decades before the financial crisis American politics and policy had been increasingly dominated by laissez-faire ideology, by the belief that markets—and financial markets in particular—should be allowed to run free. Then came the inevitable crash. But far from demanding a return to stronger regulation, much of the American electorate turned to the view that the crisis was caused by too much government intervention, and rallied around politicians aiming to dive even deeper into the policies that led to crisis in the first place.

How did this happen? Frank’s answer is that it was the bailouts that did it. By doing things Geithner’s way—by bailing out the bankers without strings or blame—the Obama administration left an understandably angry American public with the correct sense that someone was getting away with something. And the right proved adept at exploiting that sense. The famous February 2009 rant by CNBC’s Rick Santelli that started the Tea Party movement was a denunciation of TARP, the big bank bailout passed in the waning days of the Bush administration (although a plurality of voters believe that it was passed under Obama). True, Santelli focused all his ire on a tiny piece of TARP, the planned aid for troubled homeowners (aid that mostly never materialized), not the much bigger aid for banks. But at least he was blaming someone, which the Obama administration was refusing to do.

And by the time Obama began, tentatively, to suggest that some bankers might have misbehaved a bit, it was too late. The entire Republican Party and much of the electorate had settled into a narrative in which the financial crisis of 2008—a crisis that followed fourteen years of hard-right Republican congressional dominance and eight years in which hard-line conservatives controlled all three branches of government—was caused by…too much government intervention to help the poor and, especially, the nonwhite. As Frank writes:

Back to the usual, all-purpose culprit: government…. The feds forced banks to hand out special loans to minority borrowers…and…the entire financial crisis was a consequence of government interference.

So the right has recast itself as the enemy of “Big Business,” not because it’s business but because it’s insufficiently capitalist. No better proof of the currency of that view, Frank points out, than a 2009 Forbes article by Paul Ryan, “Down with Big Business,” where he argues, “It’s up to the American people—innovators and entrepreneurs, small business owners…to take a stand.”

But why did the right do so much better a job than Obama and company of seizing the moment? We’ve already seen part of the answer: Democrats in general, and Obama in particular, were too close to Wall Street to deal effectively with a crisis that Wall Street had created. Frank also makes an important point: in the recent political climate, ignorance really has been strength. You might think that the hermetic intellectual universe the right has created for itself, a kind of alternative reality walled off from any evidence that might contradict faith in the wonders of free markets and the evils of government intervention, would be a liability for the GOP. And it does indeed wreak havoc with actual policymaking. In political terms, however, it has given Republicans unity and certainty where Democrats have been weak and divided.

Euorzone redux. 

Many ‘debt sinners’ in 2007

Right before the financial crisis of 2007-8, few Eurozone countries could claim to have been fiscally disciplined. The figure below shows that Finland, Spain and Ireland could, but not Greece and Italy. Most other Eurozone nations – including Germany – were in the grey zone. Then the wheels of fortune that drive self-fulfilling crises started to spin, leaving us with an impression that strong moral judgments have to be terribly relative.

Figure 1. Public debts in 2007 (% of GDP)

My take is simple and less moralistic: the EU monetary union was ill-designed and poorly implemented. Some countries benefited from McExports, others benefited from McBubbles. Everybody shares some responsibility, but as is always the case in economic matters, those who benefited think themselves smart and moral and disciplined, and refuse to share any collective blame, while also doing everything in their considerable power to blame those who “lost” this round of musical chairs for their behavior and extract punishment rather than chip in on a solution. Ho hum.

Latvia is your austerity success story? This desire to “punish” economic “losers” for bad “moral behavior” is what makes the idea of Austerity so appealing in the face of logic and evidence. The kind of myopic vision that refuses to see the Austerity end game also finds weird little comforts and confirmations for their ideas in places wholly unsuited to providing said evidence. Here is a more accurate picture of Latvia (read the whole thing for a detailed explanation)…

Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened. Its government has chosen austerity, its people have not. Finding no acceptable alternative, much of the labour force has elected to emigrate. This is a major factor holding down its unemployment rate to “just” 15 per cent today.

Incoherent “economic liberties.” I’m glad Mike Konczal weighed in on this. His thinking is often very similar to mine (only better organized and articulated)… The question is, essentially, can you enshrine some basic economic liberties in the constitution and expect market forces to spew forth a more just and fair society? Like a “market-based-democracy?”

Now here’s what I mean by incoherent: treating economic issues as a basic liberty tells us nothing about how to address stabilization one way or the other and substantially confuses our intuitions about how to approach the problem – which is one of tradeoffs. The first principle would only allows certain breaches of inalienable economic liberty in order to make the most extensive set of liberties, compatible with similar liberty for others. Now I understand that the regulation of basic liberties (like free speech) is problematic for Rawls, but it dissolves into nothingness here under market democracy.

Basic liberties can’t guide us, because liberty for one comes at the expense of liberty for others. Which economic liberties are we to preserve? The one of the unemployed to work, the entrepreneur to have customers, bosses to their profits or rentiers to their capital income? All of these liberties are part of the economic realities of each agent, and these are fundamentally in tension with each other. There’s no way to view them as “compatible” with each other as a sufficient condition to animate decision-making.

The only way to address them as a matter of policy is to balance them against each other according to some principle. Full employment? Price stability? Deflation and the Gold Standard? Bringing in the concept of liberty prevents the ability to discuss these in terms of tradeoffs, as the whole point of basic liberties is that groups of citizens can’t have their basic liberties traded off each other.

One could say that the only system is thus one of no stabilization. But this is a policy choice, no different than emphasizing full employment at all costs. There’s nothing about mass unemployment that must contain more inalienable liberty than full employment – it is just a different set of actors who benefit. And this would look suspiciously like bringing in one set of arguments for how the economy should work and whom it should work for through the courts, rather than democratically through argument in the public sphere.

This incoherence exists more broadly. For instance, uses of basic liberties aren’t up for being traded. I can’t sell you my vote, and I can’t ask the government to enforce a contract where you’ve sold me your right to a fair trial. Yet economic transactions are all about trading off economic rights. When I sell you my labor I’m accepting serious limitations on what I can do with my labor – it now belongs to you.

This seems less like an intelligent solution than the final rotting of our brains under the all-powerful delusion of “markets are perfect” in every way. Must.Resist.MUST.RESIST.must… Ho hum.

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