Introduction to Jeffrey Sachs
When I announced via Facebook that I had just recorded an interview with Jeffrey Sachs, and that I was rather soft on him, a little firestormlette ensued. Should I have given him a hard time, demanding penance for the harsh deflationary advice that he gave to Bolivia, Eastern Europe, and Russia, or should I let is slide because he’s doing pretty good stuff now. I went for the latter, but filed my reservations in the introduction to the interview. Here’s what I said. For more, see my review of his 2005 book.
My next guest is the economist Jeffrey Sachs. Sachs teaches at Columbia University, where he directs The Earth Institute, a multidisciplinary center that gathers together social and natural scientists and policy wonks to devise approaches to poverty, environmental degradation, and disease.
Sachs is a problematic guy. He rocketed to fame in the mid-1980s, when he helped engineer the shock therapy—a term he hates—that took Bolivia’s inflation from 20,000% to 0%, while leaving Bolivia a very poor country. As the 1980s turned into the 1990s, he advised governments in Eastern Europe and Russia on how to turn capitalist practically overnight. The changes caused enormous dislocation and impoverishment. Sachs denies any responsibility for those bad outcomes—in fact, when I interviewed him ten years ago, he blamed the Russians for not following his advice. Many people who worked with him at the time regarded him as an arrogant, know-it-all outsider who applied textbook economists to societies he didn’t understand.
But over the last 10 years, Sachs has changed. (He denies that he changed, but most outsiders think he did.) He has become more and more critical of economic orthodoxy, both in the poorer parts of the world and now increasingly in the U.S. As you will hear, he’s extremely critical of the oligarchy that’s run the U.S. into the ground—in terms not unfamiliar to listeners to this show. (For an in-depth look at Sachs’s evolution, see my review of his previous book.)
So what are we to make of this? Some of my friends and colleagues think that Sachs should do penance for his past before we applaud his current work; others think that acting as a high-profile critic of orthodoxy is penance in itself. I thought I’d lay out the dilemma before playing the interview. We report, you decide.
New radio product
Freshly posted to my radio archives:
November 19, 2011 Frances Fox Piven of the CUNY grad center—whose greatest hits are collected in Who’s Afraid of Frances Fox Piven?—on the history of social movements and Occupy Wall Street
Fleshing out the corporate person
This is my contribution to n+1’s OWS Gazette #2. You can download the PDF here. It’s full of terrific stuff.
There was a witticism circulating—it embarrasses me a bit to say—on Facebook recently that went something like: “I’ll believe that coporations are people when Texas executes one.” Though I’m no fan of capital punishment, but that was the best argument in favor of corporate personhood I’ve ever heard. Because while corporations have the rights of actual living people—more, maybe—they have none of the responsibilities. Corporations routinely get away with murder. Is the problem that they’re legally persons, or that they’re not consistently treated as such?
I first came across the critique of corporate personhood almost 20 years ago, when Richard Grossman and Frank Adams published their snazzy little pamphlet, Taking Care of Business: Citizenship and the Charter of Incorporation. (Snazzy as in nicely designed. The web version isn’t, alas.) At the time, I was struck by the legalism of the approach. Grossman and Adams showed little or no interest in the economic reasons for the corporate form—why, for example, industrial development made the sole proprietorships and small partnerships that dominated the pre-Civil War landscape so unwieldy and unstable.
Making complicated stuff requires organizational stability across time and space; a single capitalist, or even a small gaggle of capitalists, all very mortal, couldn’t run a transcontinental railroad that was expected to last decades. The late 19th century was a time of tremendous economic volatility, with wild booms and busts. Almost half of its last three decades were spent in depression. One reason was that small firms didn’t have the resilience to stand up to shocks. (Another was the absence of a central bank, about which see my contribution to the previous Gazette.) I recall meeting Grossman shortly after the pamphlet was published and bringing these issues up with him. He didn’t seem very interested in the economic arguments.
I’m getting similar feelings now that corporate personhood has exploded onto the scene—first in the wake of the Citizens United decision, and more recently with OWS. There’s a fixation on the legal status of the corporation at the expense of some other, more important things.
Back in a moment to the economic angle, but Citizens United deserves a few words on its own. Basically, the reasoning is this: corporations are people. Money is a form of speech. So restrictions on corporate political spending are unconsittutional restrictions on political speech.
Which is the more serious problem with that chain of reasoning? That corporations are people, or that money is a form of speech? I’m uncomfortable with the urge to treat the Koch brothers as the focus of evil in the modern world, to steal a phrase from Ronald Reagan, but they could spend tons of their personal money spreading their poison and the issue of corporate personhood wouldn’t figure at all. Rich people have a long history in this country of buying elections and politicians. They didn’t, and still don’t, need the dodge of corporate personhood to do that nasty work.
Back to the economic argument. Critiques of corporate personhood tend to blur into critiques of bigness as an evil in itself. There is a great nostalgia for some kind of soft-focus version of the old days when enterprises were small and local. But there’s no way that small, local enterprises could make computers or high-speed rail equipment. Those things require both size and durability, things that the corporate form allows. Who’d buy complex, long-lasting equipment from a small firm that could die with its proprietor the day after tomorrow? How could such a firm design and build a train that does 350 mph while consuming minimal energy?
Of course, there may be some opponents of corporate personhood who don’t want a society that builds computers and fast trains. If so, they should tell us that explicitly.
All this doesn’t mean that we have to make peace with the status quo, however. In one of his more optimistic moments, Marx declared the modern corporation, owned by outside shareholders and run by their hired hands, “the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction” (Capital, vol.3, chapter 27.) That is, there’s no reason why such an enterprise has to be run for the benefit of its shareholders, and not by and for its workers, neighbors, and customers. It is now, but it doesn’t have to be that way forever. Of course, getting there from here isn’t one of those self-evident truths, but it’s a very enticing prospect to think about.
That panel? I’m out.
I just sent this note to the organizers of Wednesday’s Platypus “Crisis of the Left” panel:
On reflection, I’ve decided to withdraw from Wednesday’s panel. I’ve had my reservations about the whole Platypus project for a long time, but in re-reading some of your material, which put words like “imperialism” and “antiwar” in scare quotes, those reservations deepened. But Chris Cutrone’s comment on Facebook that “Platypus aims more at ideological diversity in our events than race/gender/sexuality diversity” was the last straw. If you’re holding a panel on the crisis of the left, then it’d be far more useful and relevant to have a feminist and a smart identitarian in the mix than a vile character like Paul Berman and a party hack from a Maoist cult. I see no point in spending an evening on this. I’d much rather spend the time with my kid.
I’d like to thank Lou Proyect for reminding me of just how terrible the Platypoids can be. I’d recommend checking out his writeup of them. The pic of Chris Cutrone that Lou uses to illustrate the piece—this one
—reminds me of my old comrades in the Party of the Right. For more on that experience, see “I Was a Teen-Age Reactionary” and “Partying on the Right.”
So, no thanks. If anyone goes, I’d love a report!
New radio product
Just added to my radio archives (click on date to get right to link, or other links to get more info about guests):
November 12, 2011 Yanis Varoufakis on the latest developments in the Eurocrisis • Ramsey Kanaan, co-founder of PM Press, on the theory and practice of anarchism
Me and some other guys on a panel
I’m going to be on a Platypus panel on the crisis of the left. Sorry it’s an all-male cast, but I had nothing to do with it.
an international forum on the
CRISIS OF THE LEFT
Chicago*NYC*Philly*Boston*Thessaloniki, Greece
Crisis: Pathol. The point in the progress of a disease when an important development or change takes place which is decisive of recovery or death.
“…Existing strategies and theories seem inadequate in a bewildering contemporary political scene. Disparate groups have begun to show an interest in rethinking the fundamentals of Left politics…”
@New York: Wednesday, Nov. 16th, 7:00 – 9:30pm
Silver Center, Room 207
31 Washington Place, New York, NY
NYU
Speakers:
Paul Berman (nyu), Carl Dix (rcp-usa), Doug Henwood (lbo), Bertell Ollman (nyu), Marco Roth and Nikil Saval (n+1)
Many on the Left feel a sense of crisis.
Existing strategies and theories seem inadequate in a bewildering contemporary political scene. Disparate groups have begun to show an interest in rethinking the fundamentals of Left politics. The Platypus Affiliated Society seeks to make the conversation explicit, and to host a series of discussions about the crisis of the contemporary Left: its quality, causes, and significance for future reconstitution and transformation.
Across five cities worldwide, we’ve invited figures from across the Left–academics, political organizers, theorists–to answer and debate six fundamental questions. We also pose these questions to the Left as a whole and invite responses from all quarters. The questions below stem from confusion; taking nothing for granted, we hope that confronting this confusion might open up future possibilities for renewed consciousness and practice on the Left.
for more information about the Crisis of the Left series, visit our Facebook event page, or Platypus in NYC, or Crisis of the Left
More on credit unions
From a post to the lbo-talk listserv, which I moderate:
A big CU failed in South Florida a few years back. They’d been investing in subprime CDOs, actually. Another few failed in FL and out west – they had large member business ADC loan exposure to projects that stalled at the acquisition phase. Just browse the NCUA news center and marvel at the number of CUs placed into conservatorship or acquired by other CUs in NCUA-facilitated firesales
I’ve seen stats saying 2/3s of credit unions don’t have any meaningful member loans, and that the dollar majority of all CU business loans is simple syndicate participation by the very largest of CUs.
These guys largely fail on their own terms (lack of scale/competence – looking at one of these recent failures, I see it had 429 members and $1.3MM in asssets; how the hell can you even keep the lights on?) or quickly grow into facsimilies of the big boy. [See below-Ed.].
Oh, and the NCUA’s being pushed to allow greater use of derivatives to moderate interest rate risk as we speak.
A visit to the NCUA’s news pages do confirm this. For example:
- Last August, the NCUA sued Goldman Sachs over the sale of some bad mortgage securities. Earlier, they’d sued JP Morgan and RBS on similar grounds, and more suits are anticipated. The bad securities—which, according to the NCUA, the Wall Street bankers had (familiarly) claimed were blue chip—led to the failure of five wholesale CUs, which are entities that act as bankers to smaller CUs.
- On October 27, the NCUA put the Birmingham (Alabama) Financial Federal Credit Union—which had just 429 members and $1.3 million in assets—into conservatorship because of fatal losses. Unlike too big to fail, this one was too small to live.
- On September 23, the NCUA placed the Chetco Federal Credit Union, serving a region on the California–Oregon border, into conservatorship. It had bought pieces of other CU’s loans, and held $10 million in loans on foreclosed real estate. Buying pieces of other institution’s loans is what you do when you don’t have enough good options of your own.
- On July 22, the NCUA put the Saguache County (Colorado) Credit Union into conservatorship. Too many of its loans had gone bad. Its focus, reported The Denver Post, was community development in an underbanked part of the state. This is a reminder that credit is no cure for poverty and underinvestment.
And so on. All of which means that CUs are subject to the same problems as the rest of the financial system. As I said in an earlier post, you may like the friendlier service and lower fees of a credit union, but they’re no escape from the financial reality of the USA.
Moving money (revisited)
This is an edited version of comments I made in my November 5 radio show. Much of it is a rewrite of this LBO piece, though updated to reflect the current credit union thing.
Along with the Occupy Wall Street movement has grown up a Move Our Money campaign, pushed by a group calling itself the New Bottom Line. It takes off from a brainchild of that great exploiter of unpaid journalistic labor at her eponymous Post, Arianna Huffington. Ariana’s scheme, launched almost two years ago, would have those of us with money in large banks move it to small ones. This touches on foundational populist fantasy: that virtue and size are inversely related.
When Huffington unveiled her scheme, I took advantage of the gadget on her website (the Move Your Money Project) that allowed you to enter your zip code and came back with a suggested list of virtuous, meaning small, banks. I thought I’d look into some of the suggestions that emerged when I entered by home zipcode, 11238. One, the black-owned Carver Federal Savings Bank, is a major financer of the gentrification of predominantly black neighborhoods in Brooklyn and Queens. As those neighborhoods get richer, Carver boasts, it’s partnering with Merrill Lynch (a subsidiary of the Bank of America) to offer wealth management services to the flusher new residents. Another suggestion, Apple Savings Bank, has about three-quarters of its assets in securities like U.S. Treasury bonds, not local loans. They don’t come much bigger than the U.S. Treasury. And a third, New York Community Bank, which even features that precious word in its name, financed a private equity group that bought up a lot of apartment buildings in New York in the hope of squeezing out the rent-regulated tenants and replacing them with more lucrative ones paying market rents. With the real estate bust, the PE firm is having trouble servicing its debts, and the residents of its buildings are suffering as services are cut further.
There’s a fundamental problem with these small-is-beautiful schemes. One, many small banks have more money than they can profitably invest locally. As Barbara Garson showed in her wonderful book, Money Makes the World Go Around, the portion of her book advance she deposited in tiny upstate New York bank was probably lent via the fed funds market to Chase, where it entered the global circuit of capital. This is not at all uncommon. Money is fungible, protean, and highly mobile even when it looks locally rooted. That very mutability is part of what makes money so valuable: it’s the ideal form of general wealth that can instantly be turned into caviar, lodging, Swedish massage, erotic massage, or shares of Google.
The New Bottom Line people are pushing credit unions along with small banks. Many credit unions are fine little enterprises. But they too have the more money than they know what to do with problem. According to the Federal Reserve’s flow of funds accounts, 58% of their assets are in individual loans, mostly for cars and houses. The balance is invested in bank deposits and bonds. The bonds are Treasury and federal agency securities. Again, anything but small and local. And should they get an influx of money, it’s highly likely that most of it will go to these sorts of bonds. In fact, , more than half the growth in credit union assets over the last three years has gone into Treasury and federal agency securities. Less than a quarter went to mortgage loans, and consumer credit (like credit cards and auto loans) have actually declined. There’s no way they could accommodate even a small fraction of our near-$8 trillion in bank deposits without turning to bigtime securities or Merrill Lynch wealth management services.
Getting banks under control is a matter of politics, not individual portfolio allocation decisions. Sure, you may get friendlier service and lower fees from a credit union—but you’re not really doing anything politically transformative by moving the money. Move your money and it’s still money.
OWS: crackdown imminent?
I can’t vouch for this, but it seems worth getting out there.
From: xxx
Date: Thu, Nov 3, 2011 at 10:03 AM
Friends, allies, and troublemakers,
I heard through a back-channel (which I did not seek nor cultivate) from a very highly-placed person in the Mayor’s office that they are losing patience with the status quo VERY quickly. This person was rather blunt and without giving me any sort of firm timeline nonetheless made it clear that the city has a plan, the resources, and will likely mobilize very soon (tonight? early next week? I don’t exactly know) to either clear the occupation entirely, or remove 99% of the infrastructure currently in the park (all the tents, sleeping bags, etc.—the plan 3 weeks ago for Brookfield’s ‘cleaning’).
This communication from the Mayor’s office has gone to other power brokers I’m in touch with and is being echoed and affirmed by various local elected officials, as well as the Public Advocate’s office. Press are starting to hear ruminations too. It seems the letter from Assembly speaker Silver and colleagues may have brought the (political) situation to a tipping point.
At this point, the combination of various implicit and damn-near-explicit warnings has me so I wouldn’t be surprised if they came in 4am tomorrow morning. I believe we should be prepared for that.
I haven’t been well plugged into contingency planning for this nor has there been much discussion amongst this group with reports from DA affinity groups and whoever is lately working on tactical contingency planning for a raid. I would like to suggest that the discussion be brought to the fore rather urgently.
Parallel to this, I have been given the suggestion that the only way to delay the seemingly inevitable is visible, highly-touted progress on some of the basic things that have consumed too much of my and many others’ time, including:
Beyond that, we gotta just figure out how to pivot—and fast—to whatever’s next in the wake of a Liberty Square raid.
Onward.
xxx
Fed sees a gloomier future
The Federal Reserve is just out with its latest economic projections. Since the last edition in June, they’ve turned gloomier for the short, medium, and long term. They see growth as slower, and unemployment as higher, for 2011, 2012, 2013, and for the “longer run” than they did just three months ago. For this year, they’re looking for GDP growth to average 1.6–1.7%, compared with a projection of 2.7–2.9% in June. They see unemployment as staying in its current 9.0–9.1% range, instead of falling into the high 8s. For next year, they see growth at around 2.7% instead of 3.5%, and unemployment around 8.6% instead of 8.0%. And for the long run (in which we’re all dead, of course), they’re a little gloomier than they were in early summer (I’m not quoting numbers, lest reader fatigue set in—they’re at the link). Their forecast for very modest inflation remains unchanged.
What does this all mean? One, the Fed is likely to remain very indulgent. I don’t get the complaints coming from a lot of left–liberals about they’re not doing enough. They’re doing about all they can, given the limits of monetary policy amidst such economic wreckage. They need fiscal help, and they’re not likely to get it. Two, the recovery from the economic crisis is likely to take even longer than most prognosticators prognosticated; the Fed has a pretty good track record in forecasting. And three, elite projections for the long term—not just the Fed, but the CBO as well—are quite gloomy, and popular discourse hasn’t really caught up to this fact.
Maybe they’re wrong, and a boom will take us by surprise. But even so, shouldn’t we be talking about this openly?
White people can surprise you sometimes
Here’s a fun factoid that surprised me when I discovered it: 60% of white Americans think that the best approach to lowering the crime rate is attacking social problems, not tougher law enforcement.
The exact question:
Which of the following approaches to lowering the crime rate in the United States comes closer to your own view–do you think more money and effort should go to attacking the social and economic problems that lead to crime through better education and job training or more money and effort should go to deterring crime by improving law enforcement with more prisons, police, and judges?
A fuller demographic breakdown is at the source, but here are the white/black numbers:
social problems law enforcement
white 60% 35
black 85 12
Black opinion is obviously a lot more enlightened on this question than white, but a 60% majority with a 25-point gap in favor of decency is a very pleasant surprise. (The language is also not the most favorable to evoking a civilized response: “spending more money” is right out there, and it’s not easy argue with “improving.”) The results do make you wonder what the fuck people are thinking when they vote.
Angela Davis’ advice: identify with the defeated?
There are many things I admire about Angela Davis, and I have warm memories of being on a panel with her at Rethinking Marxism 2000. She was wise and very gracious. But she reportedly told the OWS gathering at Zuccotti tonight to: 1) identify with Troy Davis, and 2) study the Attica prisoners for pointers on how to become a “dangerous class.” I have two problems with this: 1) Troy Davis is dead. His execution was a crime, but as anything but a moral force, he’s dead. And 2) the Attica prisoners were utterly crushed. Many of them are either dead or still behind bars.
The American carceral state is an appalling horror, a grotesque form of social control. But most people are not in prison. There are about 70 times as many employed members of the working class as there are prisoners in the U.S. Even among African Americans, there are about 30 times as many employed as there are behind bars. There are about 6 times as many black unemployed as there are prisoners. Yet if you judged by a lot of left discourse, the modal black American is a prisoner.
Why such an emphasis on people with no social power? The working class produces everything of value, and could shut it all down tomorrow if it wanted to. I’d be the first to say that too much behavior is criminalized, there are way too many people behind bars, and our prisons are miserable places. But the only reason to have any hope for social transformation is that “we are many, they are few.” In strictly numerical terms, there are about as many prisoners as there are members of the bourgeoisie. Revolutions are not made by the most marginalized members of a society.
Don’t get me wrong…
After the previous post, on the problems of leaderlessness, I don’t want people to get the wrong impression. I feel nothing but deep admiration and gratitude for the Occupiers—in Zuccotti and elsewhere, from Tunis to Melbourne. As I stepped out into the cold rain this morning to pick up the papers—which included that Roula Khalaf piece—I thought: man, it must suck to be camping out in this. But I’m so happy there are people who do it anyway.
So when I post something like that Khalaf excerpt, I want to remind people that we have to think about how an occupation can be made truly, materially transformative. There are people who dismiss that sort of concern as old farty parade raining (actual weather aside). Some think we shouldn’t even talk about such things. But we should. It doesn’t mean I love the Zuccottians less. It means that I love them so much that I don’t want to see all their courage and tenacity become little more than an enchanting memory.
Complications of leaderlessness
From a piece in today’s Financial Times by their Middle East editor, Roula Khalaf:
Well beyond the scene of bloodshed, the mood of Cairo was transformed, from euphoria to frustration. The memories of that glorious February moment in Egyptian history were fading as people were stuck back in the grind of daily life, finding that little had changed. In Tahrir Square, I looked for a monument to the revolution and its martyrs, but could find none, as if the upheaval has not reached its conclusion. The youth movements that mesmerised the Arab world with their formidable leadership of the revolution have splintered, failing to coalesce into a political organisation that can influence the future. Many of them want to keep up the pressure, now on the army, by returning to Tahrir on Fridays. Much of the rest of the country, however, wants peace instead of more turmoil.
Israa Abdel Fattah. The blogger was one of the most prominent young activists of Tahrir Square
“The problem for us is that we prepared for the January 25 protests without knowing it would be a revolution. We made the desert fertile but we didn’t know how to plant it,” Israa Abdel Fattah, one of the most prominent young activists of Tahrir Square, told me. “We came from different ideologies and after the revolution we joined different political parties. Maybe we should not have left the square, maybe we should have chosen a few people from Tahrir to rule.”
LBO News from Doug Henwood 
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Posted on November 26, 2011 by Doug Henwood
Radio commentary, November 26, 2011
eurocrisis infecting core
The European situation spun more deeply into crisis this week. Interest rates on 10-year Italian government bonds crossed the spooky 7% barrier, yielding 5 points more than comparable German bonds. A year ago, Italian bonds yielded 4.3%, less than 2 points above German rates. In the jargon of the markets, this blowout in Italian spreads is a sign of investor panic.
On paper, Italy shouldn’t be so bad off. Its budget is in decent shape, and Italians have plenty of domestic savings, more than enough to cover the government’s financing needs. (The joke is that Italians don’t pay taxes—they buy government bonds instead.) Sure, the Italian economy isn’t German in its mightiness, but in more normal circumstances, it would be able to continue to put one foot in front of another. But these are not normal circs, of course. Italy is the third-largest economy in the eurozone, the eighth-largest in the world—in other words, a major problem should it blow up, financially speaking. If capital flees Italy and it’s unable to service its debts, then the euro will certainly fall apart. That might not be unreasonable in the long term, but in the short, it would mean more turmoil and more recession. And if banks get scared and stop lending to each other, well, it’s 2008 all over again.
And, as I’m recording this, news came in that Belgium’s debt had just been downgraded by Standard & Poor’s, deepening the anxieties. Belgium is a heavily indebted, ethnically divided country that can’t put together a government, so the downgrade isn’t exactly a surprise—and it does remain at AA+—but the markdown underscores the fact that the crisis is moving from the periphery towards the core of Europe.
Further evidence that the crisis is moving towards the core is that Germany had a rocky bond auction earlier in the week—meaning weak demand for its debt. Though not a failure, it was unnerving that even the Teutonic core is shaking. The silver lining of this is that Germany might finally wake up to the fact that it needs to so some leadership and cobble together some sort of bailout—meaning orchestrated debt writeoffs with German financial assistance—or face total meltdown in the Old World.
good riddance, Supercommittee
Meanwhile, the U.S. deficit supercommission collapsed, unable to come up with anything. Dems were willing to cut Social Security and Medicare, but Republicans wouldn’t agree to tax increases. This is basically good news. It will keep austerity at bay for a little while longer. We do have to worry about the automatic spending cuts that this failure is supposed to trigger—though it’s hard to imagine Congress sitting back and letting those happen. But they would shield Social Security and Medicare and take a reasonable slice out of the Pentagon. That, plus the likely expiration of the Bush tax cuts, would yield a somewhat more progressive result than what this committee was likely to come up with.
But despite the groans of deficit hawks over the supercommittee’s failure, the bond market yawned on the news. In fact, because of the euro crisis, U.S. Treasury bonds now yield less than comparable German bonds. A month ago, the U.S. Treasury had to pay more than its German counterpart. If the so-called bond market vigilantes—remember them?—were really worried about fiscal ruin in the U.S., we’d be seeing our interest rates rise somewhere between gently and dramatically. But they’re not. Nervous capital is fleeing Europe—and not just the periphery, but apparently Germany too—and seeking refuge in Treasuries. So much for the U.S. = Greece scenario.
More on all this next week.
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