Hard Times in the Capitalist Kingdom

In a lazy summer moment of stasis between ending work at the New York State Attorney General’s office and starting toward my PhD in political science at Johns Hopkins University, it seems like a good time to put some thoughts about the current state of capitalism (the organizing principle/axiomatic of our society) down on paper. The hand-wringing panic and plummeting stock market of the summer of 2008 have passed us by, along with the government bailout of large financial institutions and the collective sigh of relief as markets stabilized and started gaining ground. However, a sinister and sickening malaise has set in across the developed world; all is not well in the kingdom.

            Notably in the United States, high unemployment continues to be the stick in the eye of the Obama administration, and of course the enormous number of Americans who still find themselves out of work. While many companies, including many of the bailed out banks, have returned to profitability, none of this wealth has trickled down to the average worker. Even G.M. and Chrysler, which were teetering on the edge of bankruptcy, have returned to profitability after slashing their workforces, cutting pensions and benefits, and installing new management. Companies are sitting on record piles of cash, using it to insulate them from potential risks, pad their stock prices, and pay large bonuses to their executives, many of whom had a hand in the corporate behavior that led our economy to the brink of collapse.

            What these companies are not doing is hiring new employees, investing in new ventures that could lead to sustainable growth, or moving out-sourced jobs back to America in order to take advantage of the surplus labor. The private sector, left to its own “free-market” devices, is proving that what is good for big business is resoundingly not good for society at large, at least the vast majority of it.

            The other major engine of the economy, indeed, its integral component, the State, is sitting in neutral. After enacting a rescue of investment banks and insurance companies (and their stock and bond holders), and a half-hearted stimulus plan, which consisted mainly of tax cuts, those in the U.S. government seems to have lost the will and the urgency to improve the economy. Over the past three years, the government has been long on rhetoric, excuses, political infighting, and half-measures, and short on effective policies that actually produce results. Keynesians like Paul Krugman have continued to argue that the proposed stimulus was always too small, and that the Obama administration must confront Republican opposition, in spite of the potential for filibuster or gridlock. This did not happen. Instead, Democrats, with Obama taking the lead as conciliator in chief, have capitulated to Republican blackmail on a host of issues, from the healthcare bill to Bush-era tax cuts for the wealthy to new financial regulation of derivatives to cutting the deficit and now raising the debt ceiling.

Ethnocide in Tibet?

A Times story today reports that China plans to phase out the Tibetan language from Tibetan schools, which has led to major student protests. I would really hope that the Obama administration in the U.S. and other members of the U.N. would condemn and actually attempt to stop this practice because, based on some really quick research, it completely violates the United Nations Draft Declaration on the Rights of Indigenous Peoples, adopted by the U.N. in 2007. That being said, I doubt they will do a thing.

Are we a nation of political comparison Shoppers?

"In this way, of course, money only mirrors other aspects of our political moment, where the prevailing mood generally seems to swing from one kind of antiestablishment ethos to another. In the age of eBay and Priceline, we are now a nation of comparison shoppers, inclined to trade one governing approach for another with a frequency that would have been unthinkable 20 years ago. While one party holds power, the other is always busy learning the tactical lesson of its most recent defeat and counting the months until it can strike back."

Do people agree with this assessment of Americans as political comparison shoppers? Is it true that the majority just hates whoever is in power or is it just the vocal minority? It seems as if this is more tied to the economy, which is ever more frequently undergoing crises, than to some new techno-psychological behavior on the part of the masses.

From: Campaign Money Tends to Flow to the Opposition - October 20, 2010

Rationale for Increasing Capital Reserves of Big Banks

This was just a good blog post in general, but I thought this was a highlight:

The rationale for the capital increase is that in recent years the financial sector imposed massive losses on the rest of society by the mismanagement of credit. If the big banks have a machine that provides supernormal returns to employees and creditors while causing frequent losses to taxpayers (through the fiscal costs, measured in terms of the increase in net government debt as a result of the recession), savers (because interest rates are cut to zero by the Federal Reserve’s policy response), and their own shareholders in many instances, then reducing the voracity of this machine is for the general good.

From: NYTimes Economix blog