Bleakonomics

Rob Larson

Description

This is a darkly humorous guide to the three great crises plaguing today's world: environmental degradation, social conflict in the age of austerity and financial instability.



Rob Larson holds mainstream economic theory up against the grim reality of a planet in meltdown. He looks at scientists’ conclusions about climate change, the business world’s opinions about its own power, and reveals the fingerprints of finance on American elections.



Through ascerbic analysis, Bleakonomics unveils a world of extreme inequality, confusion and insanity.



Preface The Plutonomy Papers

Part 1: External Damnation The market’s unintended impact on the environment

Introduction 'Externalities' in theory

1. Come Hell and High Water

2. Hug Them While They Last

3. Hot Water Capitalism's "best economic case"

4. The Brown Peril Atmospheric

5. Cause and Side-Effect

6. As Not Seen On TV

Part 2: Will Work For Peanuts The job market and war on labor

Introduction The labor market in theory

7. Classroots

8. Hitting the Class Ceiling

9. Fight and Flight

10. MidEast Meets MidWest

11. Ebony & Irony

12. The Subprime Court

13. Keeping Down With the Joneses

Part 3: The Invisible Hand Gives the Finger The crisis-prone finance market

Introduction Credit markets in theory

14. Pop Goes the Economy

15. Not Too Big Enough

16. Bonanzas As Usual

17. Fed Up

18. Starved For Attention

Conclusion: Invisible Sleight-of-Hand Economics as a failed science

Notes

Index

Sujets

• Environmental Economics
• General officer
• Political economy
• Macroeconomics
• Labour economics
• Economics
• Business
• General
• Labor
• Labour

Informations

• Publié par: Pluto Press
• Date de parution: 05 octobre 2012
• Nombre de lectures: 0
• EAN13: 9781849647861
• Langue: English

Extrait

Bleakonomics

First published 2012 by Pluto Press 345 Archway Road, London N6 5AA
www.plutobooks.com
Distributed in the United States of America exclusively by Palgrave Macmillan, a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010
Copyright © Rob Larson 2012
The right of Rob Larson to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library
ISBN 978 0 7453 3268 0 Hardback ISBN 978 0 7453 3267 3 Paperback ISBN 978 1 8496 4785 4 PDF eBook ISBN 978 1 8496 4787 8 Kindle eBook ISBN 978 1 8496 4786 1 EPUB eBook
Library of Congress Cataloging in Publication Data applied for
This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental standards of the country of origin.
10 9 8 7 6 5 4 3 2 1
Designed and produced for Pluto Press by Chase Publishing Services Ltd Typeset from disk by Stanford DTP Services, Northampton, England Simultaneously printed digitally by CPI Antony Rowe, Chippenham, UK and Edwards Bros in the United States of America
Contents


Preface: The Plutonomy Papers
Part I External Damnation: The Market’s Unintended Impact on the Environment
Introduction to Part I: "Externalities" in Theory
1 Come Hell and High Water: Scientists Indict Capitalism
2 Hug Them While They Last: Costs Beyond the Pump
3 Hot Water: Capitalism’s "Best Economic Case"
4 The Brown Peril: Atmospheric Brown Clouds and Asian Neoliberalism
5 Cause and Side-effect: Big-picture Externalities
6 As Not Seen On TV: The Market and the Media
Part II Will Work For Peanuts: The Job Market and the War on Labor
Introduction to Part II: The Labor Market in Theory
7 Classroots: "Run-of-the-mill Class Conflict"
8 Hitting the Class Ceiling: The Modern Practice of Class Confrontation
9 Fight and Flight: Economic Conflict, Past and Present
10 Mideast Meets Midwest: Labor Uprisings of 2011
11 Shortchange You Can Believe In: The Obama Administration and Neoliberalism
12 The Subprime Court: The Corporate Lock on the Roberts Court
13 Keeping Down with the Joneses: American Survival Strategies
Part III The Invisible Hand Gives the Finger: The Crisis-prone Finance Market
Introduction to Part III: Credit Markets in Theory
14 Pop Goes the Economy: The Origin of Financial Bubbles
15 Not Too Big Enough: How America’s Banks Got Too Big to Fail
16 Bonanzas as Usual: How Sky-High Bank Profits Persist Despite Bad Loans
17 Fed Up: The Desperation of Quantitative Easing
18 Starved for Attention: Financial Speculation and Rising Food Prices

Conclusion
Invisible Sleight-of-hand: Economics as a Failed Science

Notes
Index
Preface
The Plutonomy Papers
The United States is experiencing its worst economic conditions since the Great Depression. Even Americans in the most prosperous communities know the sight of desperate panhandlers on street corners and off-ramps. The reason for this development was thoughtfully analyzed in 2005 and 2006, when an interesting investment strategy was proposed by analysts for Citigroup, the giant "megabank" and financial services firm. The confidential investment memos, later leaked, were based on an economic phenomenon the strategists called "Plutonomy." 1 The investment strategists coined the term to mean an economy "where economic growth is powered by and largely consumed by the wealthy few." The authors consider plutonomy to have appeared in the United States in the past, for example, in the sharp levels of economic inequality seen in the 1920s, on the eve of the Great Depression.
The bank analysts refer to the good deal of recent research indicating that the majority of the US population has seen its share of national income and wealth fall significantly. The analysts’ own conclusion was that these had descended to a sufficiently low level that changes in the average American’s spending no longer make much difference for the broader economy: "There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the ‘non-rich,’ the multitudinous many, but only accounting for surprisingly small bites of the national pie."
The numbers that the bank analysts use to back up their conclusion are no joke: "the top 1% of households in the US, (about 1 million households) accounted for about 20% of overall US income in 2000 ... That’s about 1 million households compared with 60 million households, both with similar slices of the income pie!" More importantly, "the top 1% of households also account for 33% of net worth." And in an interesting anticipation of the Occupy Wall Street movement, the report observes that "Clearly, the analysis of the top 1% of US households is paramount."
The bank strategists believe that the sharp rise in incomes for the "uber-rich" and the return of a plutonomic system are in large part the result of the "reduction in corporate and income taxes" over recent decades, along with globalization and productivity growth. However, they expect a "potential social backlash" arising from "the post-bubble angst against celebrity CEOs" and "their bloated, very large share of the economy." Indeed, the perception seems to be that while the US and other countries "apparently tolerate income inequality ... the most immediate challenge to Plutonomy comes from the political process."
Of course, being investment analysts, the entire point of the report is that it’s not a problem having a tiny elite of rich households holding the reins of our economic system. They insist "We have no moral opinion on whether this income inequality is good or bad, just that it matters a great deal." The real issue brought up in their reports is instead how to make money from this development:


We think the plutonomy is here, is going to get stronger, its membership swelling from globalized enclaves in the emerging world, we think a ‘plutonomy basket’ of stocks should continue to do well ... Binge on Bling ... These toys for the wealthy have pricing power, and staying power. They are ... more desirable and demanded the more expensive they are. 2
In other words, when you’re rich enough, sports cars and yachts are for showing off, and higher sticker prices send a stronger message. Thus, Citigroup’s staff concludes that this "ultra-high net worth" household consumption has now come to drive the whole system, but again "This is simply a case of mathematics, not morality." However, somewhat later in their report, they do concede that "plutonomists or capitalists ... have benefited from trends like globalization and the productivity revolution, disproportionately. However, labor has, relatively speaking, lost out ... Ultimately, the rise in income and wealth inequality to some extent is an economic disenfranchisement of the masses to the benefit of the few." And while most theoretical economists have continued to say that economic growth benefits everyone, because "a rising tide lifts all boats," the Citi analysts mock this concept they ran an investor conference subtitled "Rising Tides Lifting Yachts."
Meanwhile, the conservative London magazine, the Economist , described what plutonomy means for most of us:


More than half of all workers have experienced a spell of unemployment, taken a cut in pay or hours or been forced to go part-time. The typical unemployed worker has been jobless for nearly six months. Collapsing share and house prices have destroyed a fifth of the wealth of the average household. Nearly six in ten Americans have cancelled or cut back on holidays. About a fifth say their mortgages are underwater. One in four of those between 18 and 29 have moved back in with parents. Fewer than half of all adults expect their children to have a higher standard of living than theirs, and more than a quarter say it will be lower. 3
Crucially, the large majority of economists failed to anticipate the disastrous financial crisis of 2008, which kicked off the current period of economic decline. In the years of the $8 trillion real estate bubble that led to the crisis and recessions, most professional economists ridiculed the idea that the bubble was unstable and dangerous. While a small minority pooped the party, and will be discussed later (see Chapter 14), the majority of the profession massively failed to anticipate the monumental series of chained disasters that it triggered. If economists failed so badly at this basic test, one might ask what is the point of supporting us. Even the much-maligned weatherman can see hurricanes coming a few days away.
This book attempts to break from this embarrassing tradition and explain how we found ourselves in this mess. The approach is to look at the three main components of today’s economic straits: deterioration of the world’s natural systems, social conflicts arising from concentrated wealth, and the financial instability seen explosively in our recent market bubbles and crashes.
THE PLAN OF THIS BOOK
This book is laid out in three parts, each one dealing with one of the three major economic crises mentioned above. Part I, "External Damnation," is all about the environmental crisis that the world’s scientists are up in arms over, considering how "external" side-effects of our economy are causing huge-scale deterioration of the planet’s natural systems. The chapters within the section deal with different aspects of this process, starting with an overview in Chapter 1 and then proceeding in Chapters 2–4 to look at externalities that affect ecological systems on land, sea and air, respectively. Chapter 5 looks at the total scale of this destruction, and Chapter 6 extends the picture to the marketplace of ideas