LBO News from Doug Henwood

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February 20, 2020 Colleen Eren, author of Bernie Madoff and the Crisis, on why the Ponzi schemer deserves release from prison (op-ed here) • Jamieson Webster psychoanalyzes money and left melancholy (interview with Fiona Alison Duncan here)

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February 13, 2020 Yasha Levine on Chrystia Freeland, Ukrainian Nazis, and the proxy war against Russia • Lizzie O’Shea, author of Future Histories, on fake techno-utopianism and imagining a better future

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February 6, 2020 Sofia Japaridze on Congressionally protected wage theft in the libertarian paradise of post-Soviet Georgia • Margaret Kimberley, author of Prejudential, on the long, oppressive relationship of presidents to black people

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January 30, 2020 John Clegg, co-author of this article, on the economic roots of mass incarceration • Tobita Chow & Jake Werner, authors of this paper, on the US–China trade war

Union density: yet another low

Preparing to write up the 2019 union density statistics from the Bureau of Labor Statistics, I looked at last year’s and was tempted just to copy–paste. Here’s the lede, as we say in journalism:

Union density—the share of employed workers belonging to unions—fell to 10.5% in 2018, the lowest since the Bureau of Labor Statistics began reporting the data in its modern form in 1964, down from 2017’s 10.7%.

The only edit I’d have to make in this bit is to change “10.5% in 2018” to “10.3% in 2019.” Similar things could be said for subsequent sentences. Union membership for private sector workers fell 0.2 point to 6.2% and 0.3 for the public sector, to 33.6%. (See graph below.) The private-sector number is an all-time low, and down almost 30 points from its 1953 peak, and below the level in 1900 (though that number must be taken with several grains of salt). The public figure is the lowest since 1978, which was at the tail end of a five-year surge in membership; it’s down over 5 points from its 1994 peak.

Union density long

Though public sector density drifted lower for years after that peak, the slide accelerated after 2011, the year Wisconsin governor Scott Walker launched his war on the state’s public sector unions by allowing members to opt out of membership. Other states followed suit, like Michigan in 2013 and Ohio in 2016. Then, in 2018, in the Janus case, the Supreme Court declared that public sector workers nationwide could not be required to pay union dues. These moves have achieved the desired results, and probably have a lot more to run.

Another bit I’m going to copy–paste from last year (click here and scroll down a screen or two to see the graph):

There’s an old lie that unions are good for white men and no one else. That’s the opposite of the case. As the graph below shows, black women, for example, earn 63% as much per week as white men overall; belonging to a union brings that up to 78%—still a large gap, but a much smaller one. Nonunion Latinas earn 60% as much as white men; a union brings that up to 83%. And, as a team of researchers from the Economic Policy Institute argues, unions can raise the level of nonunion workers if they’re prevalent enough in a geographical area or industrial sector. No wonder employers hate them.

As the map below shows, there are strong geographical patterns to union membership, with organized labor strongest in the Northeast, Upper Midwest, and Pacific Coast, and weakest in the South and Mountain West. At the bottom are the Carolinas, where just over 2% of workers are unionized, a tenth the share of Hawaii and New York, the top states.

Union density by state 2019

Yearly changes in membership at the state level are pretty noisy, but a longer-term look is revealing (graph below). Only four states saw gains between 2000 and 2019, and those were tiny. Vermont, the champ, was up all of 0.9 percentage point (though that still didn’t reverse the decline between 2015 and 2018). By the time you get to number seven, you’re talking small declines. At the bottom of the ranking, losses were many times larger, with Wisconsin, Michigan, and Ohio among the biggest losers.

Union density by state 2000-19

And this is more than ten years into an economic expansion, during which the unemployment rate has been under 4% for 18 of the last 20 months. Yes, I know there’s a lot wrong with the job market, but this is about as good as it’s going to get. Come the next recession and the decline is likely to be worse as corporations and governments look to cut costs.

There are a lot of things wrong with American unions. Most organize poorly, if at all. Politically they function mainly as ATMs and free labor pools for the Democratic party without getting much in return. But there’s no way to end the 40-year war on the US working class without getting union membership up, so these density stats are nothing but bad news.

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January 23, 2020 Jessica Whyte, author of The Morals of the Market, on the relations between neoliberalism and human rights politics • Michele Masucci and Joanna Warsza, editors of Red Love, on Alexandra Kollontai and her views on love, comradeship, and the family

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January 16, 2020 James Meadway, former economic advisor to the UK Labour Party, on the British election, how to fight political cynicism, and ideas for reindustrializing busted regions • Katherine Moos on the costs of social reproduction and who pays them (paper here)

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December 26, 2019 Adam Kotsko, author of “The Evangelical Mind,” on the life and thought of that tendency • Shailja Sharma on India’s new citizenship law and protests against the country’s drift into fascism

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December 19, 2019 Aditya Chakraborty on the British election, BoJo, Brexit, the state of the Labour Party • Nathan Robinson, author of Why You Should Be a Socialist, on that very topic

RIP, Paul Adolph Volcker

Paul Adolph Volcker is dead at the age of 92. (Most accounts of the man suppress the middle name, though it was often pointed out with bitter glee by builders and others who were undone by his high interest rate policies in the early 1980s.) As I wrote in LBO when he left office in 1987, if capitalism gave out a Hero of Accumulation award, he would have been first on the honors list.

Let’s recall what he did, because all the worshipful obits will almost certainly sanitize the history. Volcker was appointed chair of the Federal Reserve by Jimmy Carter—on the recommendation of David Rockefeller—to get inflation under control. Carter’s old Georgia friend and advisor Bert Lance tried to tell him it was a mistake, and that it would almost certainly cost him re-election. Lance, now remembered as little more than a Good Old Boy, if he’s remembered at all, was right. But Carter ignored him. The charms of a Rockefeller are irresistible.

Inflation is a complicated thing, and this is no place to delve into those complexities. For the purposes of this post I’ll just say a couple of things. Part of the reason for rising inflation in the 1970s was that oil exporters had been jacking up prices—from under $4 a barrel to over $10 in the first oil shock of 1973–1974, and then from under $15 to over $30 in the second shock, 1979–1980. Other commodity-exporting countries were trying to emulate their oil-exporting colleagues. And with those commodity price moves came calls for a new world economic order—one in which the North no longer lorded it over the South, and one in which the South claimed a larger portion of global wealth.

Domestically, labor was restive. There were an average of almost 300 major strikes a year during the 1970s—more in the earlier years of the decade, but they persisted throughout. There was a lot of worry that the working class had developed a serious attitude problem. There’s an appealing theory that reads inflation as a sign of stalemate in the class conflict: workers push wages higher and employers respond by raising prices to protect profits. If the workers were winning, profits would suffer; if employers were, wages would suffer. Neither happened in the 1970s.

The month Volcker took office, August 1979, the consumer price index was up almost 12% from the year before. (See graph below.) But the unemployment rate was 5.8%—not low, but below average for the 1970s. In Congressional testimony a couple of months later, Volcker declared that “The standard of living of the average American has to decline” if inflation was going to be subdued. He worked hard to make that happen.

Volcker years

He made that happen by driving interest rates up to levels previously unknown in US history (and the history at my fingertips goes back to 1857). The federal funds rate—the rate at which banks lend each other money overnight, the most sensitive indicator of Fed policy—went from 10.9% when he took office to 17.6% in April 1980. That drastic tightening of monetary policy sent the economy into a sharp recession. Unemployment rose by almost two points in a matter of months. The downturn was so brutal that Volcker retreated. He—and while Fed policy is set by a committee, the institution is dominated by its chair, and Volcker was a particularly forceful chair—drove fed funds briefly below 10% in the summer of 1980.

But inflation persisted as the economy recovered, so Volcker went back to war. He pushed the fed funds rate to a peak of 19% in January 1981, let it fall a few points into the spring, then pushed it back to 19% in June and July. The economy went into a deep recession, the worst since the 1930s (though we outdid it in 2008–2009). Bankruptcies zoomed, and the unemployment rate broke 8% in November 1981, 9% in March 1982, and 10% in September. Inflation, which had been falling in 1980 but not seriously enough for Volcker, began falling for real in late 1981.

With inflation breaking below 6%, Volcker relented in August 1982—not so much because the US working class was suffering and interest-sensitive industries like housing and manufacturing were in depression, because Mexico was about to “blow,” as he put it. Like many Latin American countries, Mexico had borrowed heavily in the 1970s, the the interest rate spike was ruining them. Fearing that a Mexican default would bring down the banking system, Volcker began pushing down the fed funds rate, and in August 1982 made it clear that the regime of extreme monetary tightness was over. Inflation continued to fall, however, breaking below 3% in 1983.

From the POV of the ruling class, a couple of very good things happened as a result of that regime of extreme tightness. The recession scared the hell out of the working class, leaving millions in terror of job loss. That consciousness was reinforced by Reagan’s firing of the striking air traffic controllers in August 1981; the leader of the striking local was hauled away in chains, a picture that spoke many more than a thousand words. Strikes fell from an average of 300 in the 1970s to 80 in the 1990s—and 23 since.  The stock market took off the minute Volcker made it clear that interest rates would fall; investors celebrated the decisive victory of the owners’ contingent in the class war, a party that has continued to this day. That fearful consciousness instilled by Volcker and Reagan persists in the US working class almost forty years later: make no demands or you might find yourself sleeping on the sidewalk.

PATCO in chains.png

There was an international dimension to that class war victory as well. Capital successfully turned Mexico’s threatened default into a great opportunity to restructure the global economy to its liking. As a condition for getting fresh loans, and indulgence on the old ones, Latin American and other debtors had to agree to open up their economies to foreign capital and trade and lift domestic regulations and subsidies—the entire package of hypercapitalism that would come to be known as neoliberalism. In less than a decade, calls for a new world economic order, one favoring the South, were replaced by a intensified arrangement of rich countries telling poorer ones what to do, down to the level of what basics like food should cost. As with the domestic reconstruction, Volcker was at the center of it.

RIP Paul Volcker, Hero of Accumulation.


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December 5, 2019 Leslie Salzinger, a contributor to Mutant Neoliberalism, on gendering Homo economicus • Forrest Hylton on the coup in Bolivia and popular rebellions against neoliberalism in Chile and Colombia (Jacobin and LRB articles)

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November 21, 2019 Ryan Grim, author of We’ve Got People, on the long fight between insurgents and establishment in the Democratic party • Jenny Brown, author of Without Apology, on the history and politics of abortion in the US (check out National Women’s Liberation and Redstockings)

Warren’s cagey health plan

People on the left have been debating Elizabeth Warren’s health plan since it was released a couple of weeks ago—“realistic” or a ruse? I vote ruse, but I don’t want to make that argument myself right now. Instead, I’ll allow a research note from Barclay’s, which found its way into my inbox, do that work.

Here’s the opening paragraph of the report, by Barclay’s analyst Steve Valiquette:

Compared to her previous hardline stance on M4A, the new plan represents a significant change in tone, in our view. Not only does the transition plan push out the legislative agenda for M4A (potentially to year 3), but it also tacitly acknowledges the practical and political resistance of pushing too much change too quickly. In fact, we think Warren’s plan was carefully crafted to appease both progressive and moderate Democrats, and may afford her flexibility to pivot on health care issues throughout the Democratic primaries. All said, her near-term plan seems much closer to more moderate proposals endorsed by Biden and Buttigieg; and as such the ‘pivot’ catalyzed HC [health care] Services stocks on Fri with MCOs [managed care organizations] leading the way (+5% vs S&P 500 up 0.8%).

Health care stocks rallied on the release of Warren’s plan, meaning that Wall Street—which isn’t always right, but does have some skill in decoding political bullshit—sees her plan as political bullshit.

Warren’s defenders say the scheme, to start with a “moderate” Dem plan and wait three years to push for the full program, is politically realistic, given Congressional and other political constraints on ambitious social programs. That argument never made sense to me. If the success of the right over the last few decades has taught us anything it’s that going for maximalist demands gets results. You might have to make some concessions along the way, but you get some wins and also push the political center of gravity in your direction. If you start out already compromised, you won’t get anywhere.

So that whole phase-in approach looked to me like a signal that she wasn’t serious about the M4A part—that it was just for show. Barclay’s offers support for the cynical reading:

However, based on recent history, we note that a US president typically enacts signature legislation during their first two years in office (e.g. ACA under Obama, tax reform under Trump), so the possibility that M4A may slip until year three further decreases the likelihood that this plan comes to fruition, in our view.

The only question is how conscious Warren is of this. Since she’s quite smart, it’s hard to believe she isn’t.

Much of the rest of Valiquette’s note is devoted to analyzing how bullish her opening gambit to allow people to buy into Medicare would be for Humana ($2.6 billion in profits in the most recent year, growing at a 7% annual rate). A Medicare buy-in would allow people over 50 to buy packages similar to Medicare Advantage, the semi-privatized option run by managed care companies that restrict coverage in all the too-familiar ways. (For people under 50, there would be a “modest-cost” public option.)

Enrollees in Medicare Advantage plans rate their care lower than traditional Medicare, especially if they have chronic illnesses. Traditional Medicare allows you to “choose your doctor” and Medicare Advantage doesn’t. Since the inability to choose your doctor is one of the major raps against “socialized medicine”—nonsense, given all the restrictions that come with private plans—Warren is embracing one of least appealing parts of Medicare as the leading edge of her plan, the one that’s supposed to build support for the transition to full M4A.

But her scheme would be great news for Humana. The company left the Obamacare exchanges in 2017, and if there were a scheme to allow people to buy into Medicare, most of the migrants would presumably come from those exchanges. Barclay’s estimates a Warren-style buy-in would boost Humana’s earnings per share (EPS) by 50 cents. That’s not a massive windfall, given current EPS of just under $19. But it is a step in the wrong direction, since companies like Humana need to be put out of business, as a serious M4A plan would.

Supporting evidence: the performance of Humana stock over the last month.

Screenshot 2019-11-18 09.33.07


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November 14, 2019 Quinn Slobodian makes a return appearance to talk about neoliberals: their opposition to the EU (essay in Mutant Neoliberalism), their hatred of the 1960s, their embrace of racial and culturalist politics

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November 7, 2019 Grace Blakeley, author of Stolen, on where financialized capitalism came from and how we could get out of it • Emmanuel Saez, co-author of The Triumph of Injustice, on how the rich got richer while paying less of their income in tax than the working class (Tax Justice website here)

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