The Economy: Who Can We Blame?

July 9, 2008

Who is to fault for the economic trouble we are in. Are it politicians, economists or structural issues both are unable to influence?

Joseph E. Stiglitz, a former Chief Economist of the World Bank, sees the problems as the effects of a false theory. A theory which is more a political than economic one. In a recommendable piece in an Egyptian(!) paper headlined The end of neo-liberalism? he asserts:

[T]he losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top.

…
Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.

In today’s Guardian Simon Jenkins, himself a opinion journalist but also a trained economist with a neo-liberal bent blames economists:

When muck hits fan, economists always blame politicians. They would have some justice if they did not take credit when things go right. I was always uncomfortable at the overselling of economics as a science, when it is rather a branch of psychology, a study of the peculiarities of human nature.

…
Economic management is and always will be about politics, about the clash of needs and demands resolved through the constitutional process.

A third opinion comes in a report by The Australian about a recent Carnegie Council workshop in New York. While it is about the U.S., the central economic position of the U.S. in the world may justify some generalization:

The energy, financial and political woes that grip the US signal a decisive shift in world power, mocking the liberal delusion that Barack Obama or John McCain can return American prestige and power to its pre-Bush year 2000 nirvana. There is no such nirvana. There is instead a new reality: the greatest transfer of income in human history, away from energy importers such as the US to energy exporters; the rise of a new breed of wealthy autocracies that cripple US hopes of dominating the global system; and demands on the US to make fresh compromises in a world where power is rapidly being diversified.
…
For the US there is no easy solution to the structural forces driving
oil, energy and financial markets. Yet much of the political debate
remains in denial of these forces.

Again, who is to blame: Economic theory? Politics? Structural international issues like resources outside of the influence of economists and politicians?

The trained economist in me answers: "On one hand …, but on the other hand …". A politician or opinion maker like Jenkins will favor the say whatever underpins his more conservative or progressive ideological standpoint and blame the opposition.

But who do you think is really to blame? The voters? Idiology?

Posted by b on July 9, 2008 at 18:19 UTC | Permalink

Comments

depending on how we choose to define the problems, there are varying degrees of blame. at some point, practically everyone is culpable. even the definitions of ‘economics’ and ‘economy’ we use only evaluate a very narrow slice of life, primarily for the benefit of a small sector to hide behind as they hone their graft. for specific crimes, however, there are recognized criminals.

Posted by: b real | Jul 9 2008 19:06 utc | 1

It is futile to work for economic or political solutions to humanities problems. Because humanities problems are not political or economic. Political and economic problems do exist all right, but they are secondary.
The primary problems are philosophical and until the philosophical problems are solved political, economic, and ideological problems will have to be solved over and over and over again.
We are like a blind, def, dumb and mute Sisyphus.
The curse/gift of Sisyphus is the vicious circle we forever find ourselves in , without learning from it comes around but we never question it.
The ‘groundhog day’ that never stops to look , listen and see. There is a difference in looking and really seeing, as there is in listening and really hearing. Human behavior can be compared to the analogy of walking a labyrinth year after year in all seasons. Often we learn something we already knew. Suddenly one day you notice your shadow, and the lesson becomes the shadow.
Ever walk down the street and literally watch your shadow? it comes always from behind you, catches up with you then passes you. Just as our collective behavior.
As our DeAnander once wrote, “if the global economy continues to melt down following the childish shenanigans of high financiers over the last couple of decades, the disruption to the hypnotic rituals of work and consumption may be so extreme that the USian masses are forced out of their trance and into re-engagement with their neighbors, community organizing, etc. We could just sit around like old-time commies and wait for things to get so very bad that the proles spontaneously rebel and acquire wisdom”, but who the hell wants to wait around for that shit…
I have long given up on hoping/thinking our “leaders” are there to do the peoples biz niz, and the system that is in place now is as stagnate as the dead sea. They are not there to lead, they are there to control.
Is it perhaps, what Robert Higgs, talks of w/ his ideal of the symptoms of The Ratchet Effect. We don’t have men of vision we have jailers…

Posted by: Uncle $cam | Jul 9 2008 19:44 utc | 2

Neither of them. Read Marx, “Capital”, Part I – III”.

Posted by: Peter Hofmann | Jul 9 2008 20:02 utc | 3

Remember kids, we live in a world where Buying A Child Slave Costs Less Than An iPod
Morbid yes, but I guess, it’s The World I Know…
@Peter Hofmann
Dead labour
A close reading of the text of Volume One of Marx’s Capital in 13 two-hour video lectures by Anthropologist David Harvey. Good stuff here…

Posted by: Uncle $cam | Jul 9 2008 20:14 utc | 4

In one word:
China.

Posted by: Cloned Poster | Jul 9 2008 20:21 utc | 5

Can’t blame US decline on neoliberalism – if the IMF ever snapped on the rubber gloves and squirted a structural adjustment program up our ass, we would suffer worse than Zimbabwe. That’s another way of saying that neoliberal prescriptions would do us a lot of good. First, though, you would have to get at the US’ fundamental problems, governance and transparency. Continued international deference to US demands perpetuates that. Nothing will change until the Chinese, Russians and Arabs start throwing their weight around.

Posted by: …—… | Jul 9 2008 20:46 utc | 6

uncle
thank you very, very much for the harvey
it is a strange synchronicity & perhaps even a mad one given my physical state but when i have recently been reading again – capital & also althusser et al’s ‘lire capital’ – perhaps slothrop would call it my theology – but it does me a great good in detailing exactly the reason for the world i live in
these videos are very, very useful tools & are enlightening in the very best sense of that word
thank you
it is an antidote to the very real despair i had reading pedro’s post the other day
merci

Posted by: remembereringgiap | Jul 9 2008 20:48 utc | 7

Posted by: remembereringgiap | Jul 9 2008 20:48 utc | 8

Lets just blame the economy. I know I was brought up, trained, immersed in the earn-and-spend tradition as I’m sure all of us were to some degree. And I can observe that we have trouble imagining any other way of life.
But they do exist, have for millenia in corners of the world we call primitive.
There is a large & growing number of folks who recognise that our current system (economy) is fatally flawed because of its reliance on inflation of fiat currency for “success”, which might be the term used for gathering of monetary wealth to oneself, preferably without working too hard for it.
I don’t pretend to know a better system or how it would work, but I do agree with the subset mentioned above that attempts to salvage our old economy are pointless in the longer run (not so long now it appears).
Yes the reptiles have taken control of IMF, Fed, banks, govts which might regulate these, and seem to have an interest in causing failure, but these same reptiles have been around a long time, setting up the system. A system which we non-reptilians have used with comfort, burrowing in with nice material satisfaction. Full tummies and cars to drive.
If the cause of failure were simply old age, system unable to adapt to new reality, I would say fine, let it die. But in view of the fact that it is obviously being tampered with to cause more than normal harm to humanity, then it seems prudent to take an active role in guiding it to an easy death and develop something more appropriate. In either case our beloved capitalist system has done run its course.

Posted by: rapt | Jul 9 2008 22:14 utc | 9

I have written here before that profit is impossible and that therefore in order to obtain an advantage over someone else it is necessary to resort to fraud, lies, extorsions, crimes of all sorts of chicaneries, wars,murders. I do not doubt that Marx is right in his analysis of capitalism but his prescriptions are useless because he cannot change human nature, call that nature original sin or whatever one wishes, but unless something supernatural helps, nature will never allow us to extricate ourselves of our tragic destiny, the knowledge that tells us that either we murder or we are murdered. These are my “pet” theories according to someone of you but they are not false because they simply indicate our terrible destiny. Perhaps we should remove the veil of deception and see that behind it there is nothing, just ourselves.

Posted by: jlcg | Jul 9 2008 22:39 utc | 10

jlcg, until we can somehow remove greed from our basic nature, you are correct, as was Marx. Since that isn’t going to happen we are bound by our own human nature to keep repeating the same mistakes over and over again.

Posted by: mikefromtexas | Jul 10 2008 0:46 utc | 11

we were set up by greed.
b, you may want to check the wording of your second sentence.

Posted by: annie | Jul 10 2008 2:07 utc | 12

The last thirty five years have led us (the US) to this point. It all started with the TriLats wanting to control the world populations. To much democracy was scaring the ruling elites. Read Holly Sklars Trilateralism. You can read a synopsis at: http://www.thirdworldtravelar.com/Trilateralism/Trilateralism_Sklar.html.
Read the last paragraph and you can see elites have had their way.
The second important factor over the last thirty five years was when the supreme court declared the giving of campaign money free speech. This totally corrupted the system and helped the US rot further after Nixon had took us to the gutter.
So, is it economist fault or political? The study of political economy would be best suited. Due to frustration of elites with people power and the influence of money, the New Deal system was scraped and turned back into a Gilded Age type system again. The current economics is not new, it is an old system repackaged with nice words like supply side, or trickle down or some other nonsense. Just give tax cuts to the rich and de-regulate to unfettered capitalism and everything will be fine. Its just part of the global economy. No games here!
My take is subscribe to “Elite Theory” and Political Economy.
They go hand in hand and can explain everything. Remember, the writers referenced above are part of the system, they give cover to the experiments we pay for. The truth will barely “Trickle Down.”

Posted by: jdp | Jul 10 2008 3:14 utc | 13

Retards do not dominate. What was the question?

Posted by: dacorilitter | Jul 10 2008 4:37 utc | 14

Eisenhower – for Commie Domino Theory, although he did correctly presage the MIC
Kennedy – for Viet Nam and Bay of Pigs. Think about it. Everything went hard right
Reagan – as the godfather of the Iran-Contra BoP2, and the first S&L deregulation
Clinton – as the godfather of banks-as-brokers and S&L2 derivatives deregulation
Bush Jr – as wetawded nano-dick to wetawded nano-dick cheney to PNAC nano-dicks
All who were but strumpeting puppets on a stage, marionette stringed, so that now we have $74 TRILLION in leveraged derivatives flying around the globe and nobody knows or cares who’s pulling the purse strings, they just want a seat on that runaway train.

Posted by: Whote Kares | Jul 10 2008 6:12 utc | 15

Kevin P. Phillips in Harper’s: Numbers racket: Why the economy is worse than we know

Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional “Pollyanna Creep,” what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.

Posted by: b | Jul 10 2008 7:45 utc | 16

The present dominant economic frame endorsed and enforced by the ‘west’ – Anglos first of all – is nothing but a religion. Like all religions, it has its reasons and its uses: in no order, organization, and incomplete:
A need to dominate the rest of the world, to pick ‘winners’ who can accomplish that – competition at all levels must be adulated while the game is at the same time rigged.
> or justifying: Complacent neo-colonialism – if only the darkies would compete properly they would benefit. False, but accepted by befuddled or greedy leaders.
The desire to put paid to any kind of socialism, communism, and see the worker class enslaved for good, in any way possible. (Debt amongst others.)
ex. There are about 3 billion ppl in the world who work, are employed or ‘independents’; half earn less than 3 dollars a day.
Encourage local wars/strife, as they muddy the issue, and provide revenue for the ‘west’ (arms, humanitarians, etc.) as well as justifying all kinds of slogans and interventions. Concurrently, Big Wars, unpredictable and too destructive, are out. – Haiti, not Iran.
Create a loose class of the rich, leaders, movers and shakers, who act on all dimensions (war, military, media, industry, etc.) at once. Set up occult, weird, covert finances that favor them and permit them to act secretely. See to it that democratically elected persons are peons who know to toe the line to get their three villas with pool.
Exploit resources mercilessly and encourage population growth.
Other: …
More than a bit simplistic, one angle only, still.

Posted by: Tangerine | Jul 10 2008 15:42 utc | 17

Speaking of exploiting resources mercilessly, after yesterday’s merciless assault, today on CSPAN Representative (R) Roscoe Bartlett, BS Theology, MS, PhD Physiology,
was pimping EMP (electromagnetic pulse theory), madder than a wet hen with chicks.
Bartlett is a fly-under-the-radar Moonie from Maryland, kissing cousin to Langley.
I happen to know an ingenue in this area, who worked in the field, studied in the field, and I’ve read his policy white paper in the field. Basically, in theory,
a nuclear atmospheric burst creates charged particles which conducting surfaces
pick up, either destroying sensitive (non-military) hardware, or in extreme cases
(where everyone would be dead anyway), causing high-tension power grids to fail.
Pure theory, from unnamed “Russian scientist” wanna-join-the-PNAC-circus clowns claiming they’ve done it, just like the National Hypersonic Aerospace Vehicle
under Reagan, that was sold to US as the American version of a faster Concorde,
and 20 years and some $20B later, now the size of a small cruise missile, in two
tests, 50% CATASTROPHIC FAILURE rate, destined to be studied for another 20 years
towards a much dumbed-down purely military death-by-red-button nuclear hyper-UAV.
$40B… poof! POOF! But I digress…
The bill is being sponsored by AZ Representative (R) Jon Kyl, JD, bringing it all
back home, Arizona being ground zero for those military defense contractor hacks
who pimp this kind of pure science-fiction faith-based defense deficit spending.
Kyl is hard-core PNAC, 4th-most conservative US Senator, behind Lindsey Graham.
I would bet the trail to his office is slimed with Defense contractor gree-gree.
Oh, Bartlett was brilliant! Kyl knew what he was doing hiding behind a Kentucky windbag. “EPM is the greatest threat to America. No other threat is as great to America as EPM. America is in great threat from EPM.” Over and over ad nauseum.
Subj: EPM; Verb: threat; Object: white lab-coat defense welfare dole tax dollars.
Why don’t the carpetbaggers in Congress just fly a red, white and blue kite over the assembly and salute with a fart symphony? It’s not their taxed life savings!
It’s not even a Defense issue! All military electronics are hardened! It’s not a Homeland Security issue! No rogue nation has the ability to reach US shores, and certainly not 300 miles above the center of the US to create a mega H-bomb pulse.
THE US IS THE ONLY COUNTRY WHO CAN CREATE THE EMP TECHNOLOGY THAT BARTLETT IS PIMPING A PROGRAM TO “DEFEND US” AGAINST! WE ARE FUNDING RESEARCH WE DON’T NEED,
TO BE SOLD TO RUSSIA/CHINA/PAKISTAN BY ISRAELI SPIES, THEN USED AGAINST US!!!!!
I get a little on-edge because I remember after Viet Nam, how the already hard right became really hard right, as returning veterans, whether they saw active duty or just 20’d and out, were shuffled back into the US economy at the management level, push down on those who held management jobs through relabeling, program retitling, basement room reassigning, ever calculated trick to keep the kajamapajama white lab-coat welfare tax dole gravey-train hua-hua’ing along.
And oh boy, did it during the Reagan years. Just look at US personal income stats.
After 1984, America is pretty much straight down the tubes into Have v Have Nots,
and you know who lives in defense white lab-coat welfare tax dole land. The have’s.
Have not’s you saw on every street corner, and if you don’t remember, you’re lucky.
We ain’t seen nothing yet. By the time Obama gets into office, every one of our entitlements will be pawned off to pay for Defense science fiction, every one of our free rights hamstrung, castrated or voided, a shoot-first NeoZi.con cabal of American Halliban bringing G-d’s vengeance on women, dark skins and refuseniks,
on a credit tab that our great-great-great-grandchildren will still be slaves to.
Exactly as bin Laden would have wanted it! MISSION ACCOMPLISHED!! Good job, Kyl-y!!

Posted by: Tothe Cleaners | Jul 11 2008 0:19 utc | 18

America’s sovereign creditors ought to be thinking strategically about the US assets they have acquired. At this juncture it would not take much to cut America down to size. Losses are inevitable. The only question is the geopolitical advantage conferred by a particular sequence of asset dispositions and hedges. This is a unique opportunity to mitigate the destabilizing threat posed by America’s paroxysms of aggression. The problem is no ordinary investment decision. It demands a rigorous game-theoretic approach.

Posted by: Jacob Richter | Jul 12 2008 7:46 utc | 19

It demands a rigorous game-theoretic approach.
We know from game-theoretic approaches eh?
De- paraphrasing Curtis – he puts the source of this mindset on game theory extrapolated to all human endeavors as theorized by John Nash –who was a paranoid schizophrenic who had to be involuntarily hospitalized. He thought people were out ot get him, he heard voices telling him this same thing, and all this time did not recognize that he was delusional. Unlike “A Beautiful Mind,” in real life Nash was an s.o.b. to be around and his view of “equilibrium” in human relationships was called “Fuck you buddy.”
when these “great minds” tried out their theory on secretaries they worked with (the “great minds” operated from the mindset that everyone would try to fuck over everyone else…) — these secretaries cooperated and didn’t try to destroy others — and thus defied the “great minds'” assumptions.
so, of course, the theorists decided that the secretaries were unsuitable subjects, not that their theory was bullshit.
sort of like the neocons/bush et al now regarding foreign policy.

Posted by: Uncle $cam | Jul 12 2008 12:23 utc | 20

Your understanding of game theory is innumerate and reductive.

Posted by: Jacob Richter | Jul 12 2008 14:40 utc | 21

hahaha… perhaps your right. Of course w/discourse/speech,illocutionary signals such as yours we’ll never find out will we? Carry on sir…

Posted by: Uncle $cam | Jul 12 2008 16:10 utc | 22

The throes of the US financial sector can be perspicuously represented as a differential game. Such a game makes no prior assumption about cooperative or adversarial behavior. It is simply a specialized language of greater precision than words. This language specifies how the situation influences the participant’s behavior. In this case actions depend on the number of foreign creditors and the relative size of their holdings. It so happens that foreign creditors of the US now have unprecedented power, if their grasp of the situation permits them to exert it. America’s rivals would be remiss not to exact non-pecuniary concessions. How much would you pay to bring America to heel? How much geopolitical stability will your money? You’ll get no answer from investment advice based on portfolio theory.

Posted by: Jacob Richter | Jul 12 2008 16:16 utc | 23

…if their grasp of the situation permits them to exert it.
i am admittedly naive when it comes to the games of high finance, but i have enough common sense to understand how dangerous animals can be when backed into a corner.
how weak does the US have to be for foreign creditors to risk their investments to attempt bringing US to heel?
as a US taxpayer i hear more news about another down and out financial institution, IndyMac, hoping to nibble their salvation from my pockets. this amid rampant Freddie Mac/Sallie Mae rumors of systemic insolvency.
maybe the differential game the US financial sector is playing should take cooperative and adversarial behavior under consideration in regard to the taxation fatigue the unrepresented majority are feeling right about now.

Posted by: Lizard | Jul 13 2008 5:15 utc | 24

As an example, let China take a modest position in credit default swaps. Even a feint in that direction would drive a wedge between Treasury and agency yields until the US is forced to guarantee GSE debt. The anticipated cost of the guarantee could well sink the dollar to the point at which the US is better off issuing foreign-denominated sovereign debt, like any other backward country. I don’t doubt that the current regime (the right and its ‘Democratic’ subalterns) would resort to that expedient – they have done so before in extremis. The resulting risk premia effectively downgrade Treasury debt, increasing its cost. The cascade of adverse reactions can quickly make military adventurism manifestly ruinous for the US. To preserve a pretense of force projection capacity, the US might concede quite a lot at the outset. (Taiwan, for example, if Democratic scapgoats could be blamed.) Russia’s very different assets complicate this course – but that is why the game framework is needed for internal consistency in tracking all the ‘moving parts.’ The Russians have demonstrated a capacity for this sort of planning. Other entities need it, now.

Posted by: Jacob Richter | Jul 13 2008 14:41 utc | 25

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