So the news is that Larry Summers is Joe Biden’s economic advisor.
I’ll take credit for being early on the “People like Larry Summers are the problem with the Democrats” train. I wrote a whole post on it way back in November. In it, I wrote:
Listening to arrogant Ivy League hyper-elite technocrats like Larry Summers is exactly why the Democratic Party is in the pathetic state its is in, and continually loses elections, even to incompetent morons like Donald Trump. If Larry Summers is a representation of “liberal values” than God help us all.
Here are some insights into Mr. Summers’ worldview from various people. From Yanis Varoufakis:
‘There are two kinds of politicians,’ [Summers] said: ‘Insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcones.’ Whith that Summers arrived at his question. ‘So, Yanis,’ he said, ‘which of the two are you?’
From Elizabeth Warren:
Late in the evening, Larry leaned back in his chair and offered me some advice. By now, I’d lost count of Larry’s diet Cokes, and our table was strewn with bits of food and spilled sauces. Larry’s tone was in the friendly-advice category. He teed it up this way: I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People–powerful people–listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.
I had been warned.
From Thomas Frank’s book, Listen Liberal (p. 173):
‘One of the challenges in our society is that the truth is kind of a disequalizer.’ Larry Summers told journalist Ron Suskin during the early days of the Obama administration. ‘One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way that they’re supposed to be treated.’
And let’s not forget:
In the 1990s, during Bill Clinton’s presidency, the derivatives market was taking off and Brooksley Born was chair of the Commodities Futures Trading Commission. She warned that unregulated derivatives trading posed a risk to the nation’s financial stability. She wanted more transparency of this dark market.
But Born was undercut in her efforts by no less than Treasury Secretary Robert Rubin, Federal Reserve Chairman Alan Greenspan, Deputy Secretary of the Treasury Larry Summers and SEC Chair Arthur Levitt. This boys club turned out to be dead wrong. But they had the power. They convinced Congress to strip the CFTC of its power to regulate derivatives.
The Cassandras of Our Time: Brooksley Born and Ann Ravel (Brennan Center)
Summers is also a favorite economist of the Marginal Revolution blog from George Mason University and the Mercatus Center, the epicenter of Kochenomics.
And remember, folks, the Democrats are the “Leftist” party in the United States. After all, where are you going to go?
That doesn’t bode well for the Biden campaign does it? But it does make sense: Biden is opposed to Medicare for all, student debt forgiveness, subsidized higher education, green job creation programs, wealth taxes, higher minimum wages and universal basic income. In opposing these, he consistently invokes the old canard: Howyagunnapayforit?.
Either that, or it’s “means test” everything. After all, we have to make absolutely sure that no one “undeserving” may >*gasp*< get a benefit they don’t deserve! Perish the thought! Only the truly bereft are worthy of any kind of societal benefit; the rest of us “real citizens” can get our needs met by shopping in the big, glorious Market.
Of course, this means testing bullshit leaves all sort of cracks that people often slip through, ensuring that any government program is as unpopular as possible. This is by design. So, if you’re too rich, or too poor, you cannot get health care via the government. Too poor: get Medicaid. Suddenly earn $1 over the cutoff: sorry no Medicaid for you. Have you tried the Obamacare exchanges? Rich enough to have a “Cadillac Plan?” Oh, we’re going to tax that. All just so we don’t have to cover everyone.
Or take higher education. Make under X amount: here’s a (partial) scholarship. Make over X amount? No college aid for you. All so we don’t have free higher education for all.
Robert Evens put it well on a podcast about the West Virginia coal miners’ war (the Battle of Blair Mountain):
[59:52] “You’ll hear people saying ‘basic Income seems like a great idea, but what if X group…what if rich people get it; that’s not fair.'”
“One of the problems with that is that, when you start saying stuff like, ‘We need a basic income; we need free college; we need universal health care,’ and people start bringing [up], ‘What about this group, what about that group?’ What they’re really saying is ‘I don’t believe that this is an inherent right. I think certain individual groups might deserve it, but I don’t see it as an inherent right.'”
“And I think one of the lessons of the labor movement is [that] this shit only works when you treat it like an inherent right and you reject attempts to divide people, even among groups that might make sense to you at the time. Because, in reality, if you’re agreeing to that division at all, you are against the idea that people have a right to this sort of thing.”
The other thing it does is allow recipients of such “government largesse” to be depicted as “cheats” and “scroungers.” Add that to the bogus idea that “my tax dollars fund the government,” and you play right into the Conservative/Libertarian framing of, “They’re stealing my hard-earned (it’s always ‘hard-earned’) money to give money to those layabouts which I’m not even entitled to!” In other words, it’s deliberately sabotaging social programs to give Conservatives the ammunition they need to destroy it.
Again, to repeat, this is by design!
And since the Democrats know that the baton of government will inevitably be passed back and forth between the parties, they can count on Republicans to chip away at, or even dismantle, the programs that they’ve created. They can then depict them as the bad guys, even though that was the plan all along. Good cop, meet bad cop.
Here’s the dirty little secret: They don’t want these programs to succeed!
Thus the two party duopoly functions as one wrestling tag-team implementing the same set of Neoliberal policies to enrich the donor class at our expense.
But if both parties are virtually identical when it comes to economic philosophy, who can you vote for if you don’t agree with that kind philosophy?
No one. And that’s the goal of the two-party system. There is no alternative. That’s why the Democrats were far more effective in opposing Bernie Sanders than the have been opposing the so-called “mortal threat” Trump. #Resistance.
In my original post, I said:
My core point is this: this kind of autistic “economic thinking” is the very reason why the voting public believes there is no substantial difference between the Republicans and the (Neoliberal) Democrats. And they’re right! It’s also worth noting that Professor Cowen has let the cat out of the bag, tacitly admitting that the very discipline of economics is inherently right-wing (it makes him suspect among the left…). Yet it still masquerades as ideologically neutral!
This article from Policy Tensor makes a lot of the same points:
The tunnel vision of global leaders and the wider discourse of the articulate class is symptomatic of a deeper malaise. Put simply, we are in the grip of a very powerful ideology. It is an ideology that subordinates all goals, including the survival of our species and the web of life with which it is inextricably intertwined, to the goal of maximizing economic growth.
But it does much more. Economics as ideology distorts our perception of contemporary and historical reality. It misguides us into flawed explanatory schema for the most important historical explananda. It sharply narrows the possibility space of human action. And, most important of all, it closes off all rational courses of action that may thwart the collapse of world civilization that is increasingly getting backed-in as we ride up the hockey stick of doom.
Economics as Ideology (1): Introduction (Policy Tensor)
The genius of economics is that it is an ideology that masquerades as non-ideological. Economists always win the debate once you accept their framing of the world: as a cost-benefit cash nexus, full of rational actors where nature has no inherent value. Add that new factory to GDP, don’t subtract all the people who will get cancer from it, and so on.
Once you accept their premises, you are guided along (as if by an invisible hand) to their desired conclusions, which, by some coincidence, always benefit the rich and powerful.
And these axioms have colonized our consciousness to the extent that we don’t even think of them as axioms, we just accept them as natural. They’ve achieved cultural hegemony in Gramasci’s terminology.
When someone says, “you just don’t understand economics,” what they’re really saying is, “You’re not looking at the world through the same blinkered, autistic view as I am, therefore you can’t be taken seriously.”
Ideology consists of widely-shared lenses that are worn unconsciously. It is when we are not aware of our limits applicability of our reference frame, when we mistake the map for the territory, that we are being ideological. More often than not, we are simply unaware that we are using a specific lens to interrogate reality. Ideology manifests itself in widely-shared and unarticulated premises. It is most evident in things that are simply assumed to be true and require no justification whatsoever — mere assertion suffices. But even though widely accepted, such premises may not hold. A gap thus opens up between discourse and reality. Such gaps are a recipe for disaster. All man-made catastrophes are due, in large part, to such gaps.
Hence Tyler Cowen’s complement to Summers cited in the original post: He never ceases to think like an economist. Because thinking like an economist will be sure to get you to the libertarian conclusions that Cowen and his patrons favor, even if you are officially classified as “liberal” or are a member of the Democratic Party. Two parties, one ideology.
Recall that the modern discipline of economics as developed under the marginal revolution in the late 1800s (hence the name of the blog) is based on the following core theorems:
There are two fundamental theorems of welfare economics.
-First fundamental theorem of welfare economics (also known as the “Invisible Hand Theorem”):
any competitive equilibrium leads to a Pareto efficient allocation of resources.
The main idea here is that markets lead to social optimum. Thus, no intervention of the government is required, and it should adopt only “laissez faire” policies. However, those who support government intervention say that the assumptions needed in order for this theorem to work, are rarely seen in real life.
It must be noted that a situation where someone holds every good and the rest of the population holds none, is a Pareto efficient distribution. However, this situation can hardly be considered as perfect under any welfare definition. The second theorem allows a more reliable definition of welfare
-Second fundamental theorem of welfare economics:
any efficient allocation can be attained by a competitive equilibrium, given the market mechanisms leading to redistribution.
This theorem is important because it allows for a separation of efficiency and distribution matters. Those supporting government intervention will ask for wealth redistribution policies.
Welfare economics I: Fundamental theorems (Policonomics)
In other words, the greatest welfare (optimal good) is achieved by government getting out of the way and letting markets rip. This is not a value statement; this is baked into the very heart of economics as a discipline! Also note:
“…a situation where someone holds every good and the rest of the population holds none, is a Pareto efficient distribution.” Hmmmm…
The second theorem states that the “winners” will compensate the “losers”, and this supposedly “cleans up” the problems with the first theorem. But as noted in my earlier post, that turns out to be not so clean-cut:
In 1939, Cambridge economist Nicholas Kaldor asserted that the political problem with cost-benefit analysis—that someone always loses out—wasn’t a problem. This was because the government could theoretically redirect a little money from the winners to the losers, to even things out: For example, if a policy caused corn consumption to drop, the government could redirect the savings to aggrieved farmers. However, it didn’t provide any reason why the government would rebalance the scale, just that it was possible. What is now called the Kaldor-Hicks principle, “is a theory, “ Appelbaum says, “to gladden the hearts of winners: it is less clear that losers will be comforted by the possession of theoretical benefits.” The principle remains the theoretical core of cost-benefit analysis, Appelbaum says. It’s an approach that sweeps the political problems of any policy—what to do about the losers—under the rug.
Of course that becomes harder when you’ve had forty years of billionaire-funded think tanks promoting the idea that any wealth earned in the market is just no matter what; that market distribution is “fair”; that taxes are “punishing the winners”; and that any assistance to the less fortunate will “encourage dependence on big government.” In short, that redistribution is immoral.
Funny how those think-tanks don’t show up in any of the theorems of welfare economics. So much for theorem #2.
And I’m sure that all those people newly unemployed are just waiting to take advantage of the Pareto optimal distributions of free markets to see them through the next few months.
But what do I know? I’m an “outsider.”
“Nothing will fundamentally change” (Real World Economic Review)