The Voice of the Limulus

QE and spending by whom

Tim Barker has an excellent piece out today about left debates on whether dovish monetary policy has been bad for inequality, which has me thinking a lot (you should definitely read it).

Some very brief reflections:

  1. Tim frequently refers to the 2007-2022 period as one block when recounting assessments about the relative benefits of historically low interest rates that have prevailed since 2008 or so. He’s discussing interpretations from others — business reporters, left analysts, central bankers — in this context. But it seems bonkers to me to include that whole period when considering whether QE is on the whole bad or good for the lowest income strata of the US economy (to say nothing of the rest of the world).
  2. Low interest rates in the post 2008 period did not elicit the same boom in spending we saw in 2020; their pairing with ample support for households in 2020 is reason to investigate more whether/how those policies have made the difference in the corporate response that has disproportionately helped the lowest shares of the income strata, and an endorsement of Keynes’s argument that supporting household spending might be more important than supporting business spending in the midst of a recession.
  3. Tim’s attention to supply constraints is so important. I’d love another whole post about that, since I think a lot of the problems we’ve seen recently re: inflation owe to businesses putting capital expenditure on ice in the decade or so following the Global Financial Crisis. His points about household wealth rising due to rising home prices is also on point; I’m curious if there’s any work on the rapid gains households made in the housing bubble — very different in its contours — in late 2020-2021 from the one associated with subprime mortgage lending.
  4. I think all of what we’ve seen is a big reason to dive back into chapter 12 of The General Theory. If firms’ and banks’ (or at least, the biggest ones) responded to low interest rates in the 2010s by investing comparatively more in financial assets than capital expenditure, it’s a big argument for finding strategies outside of monetary policy to motivate growth.

These are just some preliminary thoughts about a provocative topic to read about when I should be getting ready for the first day back on campus after winter break.

Something New for the Spring Semester

There’s so much I’ve wanted to write about in recent weeks, but alas. Here is one little thing I’ve been working on: a syllabus for a course I’m teaching on cryptocurrency. Would love for people who think about this to have a look. While I’m unlikely to add much to this iteration, it would be cool to hear from other’s about what they’ve done in this space.

Authors we’ll be reading include Robert Skidelsky, Mike Beggs, Victoria Chick, Charles Kindleberger and Robert Aliber, and others, as well as Matt Levine, Elizabeth Kolbert, David Yaffe-Bellany, Taylor Nicole Rogers, Ephrat Livni, and myriad other reporters on crypto. My goal is for students to get a blend of more academic treatment of topics like money, asset bubbles, regulation, and so on, as well as more contextual treatment of the nuts and bolts of cryptocurrencies, who gets swept up in the manias, who profits, and who gets hurt when things don’t work.

Something new I’m doing: writing prompts for learning. I’ve been inspired by John Warner to do what I can to resist the five paragraph essay, especially given the rise of, well, you know. To that end, I’m asking students to respond to prompts about thorny questions no one necessarily wants to answer in real time, like ‘when did you learn about crypto? what do you think regulation of crypto would look like? is there anything you have changed your mind about re: crypto?’ Then, hopefully, we’ll talk about them in class!

Research project! More with the grounding assignments in stuff students may find interesting, and rejecting that five-paragraph essay model. I’m having students write pamphlets explaining something they think a particular audience of their choosing should know about cryptocurrency. It’s deliberately open-ended. I may regret that. Ah well! At worst, we’ll have a bunch of educational materials that I may ask my students for permission to use if they let me teach this course again.

If you have a look, do let me know what you think.

Some Thoughts on Teaching About Inflation from the Left:

Teaching about inflation in my Principles of Macroeconomics classes is a somewhat delicate operation. Inflation is a charged topic; it’s typically one of the top two variables that my students say they worry about in an informal survey that I give at the start of each semester. The other variable they care most about is unemployment, which may illustrate the tension people understand between these two, sometimes competing, dragons to be slain with economic policy. Inflation is also poorly understood. However, it frightens many people, not just college students, and is currently being touted as another bad harbinger for Democrats’ chances in the midterm elections (2022) and Biden’s prospects of winning a second term. I have come, over time, to take extra care to emphasize what inflation is and isn’t, why it is a confusing topic that generates sensationalist rhetoric and political grandstanding, and how students might better understand the relationships and dynamics that contribute to inflation overall.

When I started teaching macroeconomics, these worries about inflation annoyed me. In the first ten years that I taught the subject, inflation rates were low, and routinely below 2%, the targeted rate the Federal Reserve aims for. While I used to minimize the importance of inflation as a worry – it’s so low, you don’t know what you’re talking about, people constantly overestimate inflation – I have shifted tactics over time. In hindsight, I wish it hadn’t taken the observed rise in inflation in the past two years at the time of writing for me to do so, but here we are! Inflation invokes scary images for many: the interwar period in Germany, hyperinflationary episodes in low and middle income economies in the 1980s and 90s, and the prospect of worsening living standards, especially for those living on fixed incomes. Dismissing fears of inflation as incorrect (which they may be) or irrelevant compared to unemployment (a value judgement that may require persuasion and subtlety) is more likely to alienate students, and to lose potential allies to work on changing their parents and grandparents’ minds.

At its most basic, inflation refers to a sustained increase in the aggregate price level. A common method for assessing inflation is to observe the change in a so-called market basket of commonly purchased goods and services, which varies from country to country. The consumer price index (CPI) in the US tracks inflation by the indexed measure of the price of this specific market basket. If a critical mass of components of the basket get more expensive, the CPI grows. The reverse occurs if more goods and services fall in price, or if their decrease in price is more dramatic than the parallel increases in price. The Bureau of Labor Statistics (BLS) constructs myriad CPIs. These indices focus on different parts of the economy (urban versus rural, regions of the US), and may include or exclude particular goods to account for particularly volatile prices for goods like food and fuel. The basic CPI includes the highly volatile components of food and fuel; the personal consumption expenditure (PCE) index does not. These indices are used to calculate how benefit payments should change, if they are indexed to inflation, and as official measures of inflation overall.

When I teach inflation, I emphasize thinking about inflation as an increase in the aggregate price level – a literal inflation. Effectively, an increase in the price level, all else equal, should lead to a decrease in real purchasing power. It’s common for people to think about inflation leading to a decrease in purchasing power, which they may describe as a ‘decrease in the value of the dollar’. While this is effectively the consequence of rising prices and diminished purchasing power, I find that it can turn people around if they extrapolate from inflation to changes in the exchange rate, which also considers the price of other currencies in terms of the dollar (or vice versa). This extension may complicate students’ understanding of the link between changes in the exchange rate and inflation as a whole. If the dollar appreciates relative to other currencies, it implies that imports are relatively less expensive to US consumers, though the reverse may be true for exports. Inflation can occur in tandem with appreciation or depreciation of a currency in foreign exchange markets, so I try to emphasize changing only one variable at a time.

What factors may contribute to inflation overall? Supply factors are most directly associated with inflation. If producers observe higher costs of production, whether due to labor costs, input costs, or service costs, these changes are most directly linked with changes in overall prices, if producers opt to pass them on. Do producers always pass on increased costs to consumers? Not necessarily. Producers care about consumers’ price elasticity of demand (propensity to change quantities they buy relative to changes in the price); changing the price of goods for sale may be costly in and of itself. Another factor to consider is why a producer might transfer costs to consumers. Does a business in a particular industry earn a profit margin? The prevalence of profit margins and rates varies industry to industry. Some high price services like childcare and restaurant service may have low profit margins, given the high costs of operating in those industries. Other goods and services may generate much higher profits, based on the willingness and ability of producers to mark up their output for sale.

How do demand factors affect inflation? It’s complicated! If demand induces firms to produce at rates associated with increased average costs of production, and if those firms want to maintain their profit margins, they may increase prices. These changes may be temporary or longer lasting. But the component of inflation that can be attributed to demand is tenuous and hard to verify. Similarly, the effects of government spending on inflation is ambiguous – if a government is spending to improve road infrastructure, the costs of transporting goods may fall as firms spend less on vehicle maintenance, for example. Will this spending translate into lower prices? It’s difficult to predict from outside. Key pillars of the ‘Build Back Better’ bill, which aimed to negotiate for lower prescription drug prices and to fund more childcare services, could have decreased the costs of two sources of rising costs for households in recent decades. These policies were clearly focused on depressing prices of a good, or fostering an increased supply of a service, rather than mitigating demand for those services, which is how anti-inflationary policy typically looks in practice.

Yet, despite the ambiguous links between changes in demand and inflation, the specter of inflation is invoked to oppose expansive welfare states and government spending. Centrist Democrats have asked President Biden to stop talking about welfare programs in favor of explaining how his administration will slow or reverse inflation rates. Republicans that have willfully increased structural deficits when they’ve held the presidency quickly pivot to arguments for austerity as a tool to curb inflation. Comparisons of fiscal responses to the Great Recession reveal an unprecedentedly muted government spending response to the largest recession since the Great Depression. In Europe, stronger economic members of the Eurozone argued that 4-5% inflation in Germany was just as bad an outcome as 20%+ unemployment rates in Southern European states. Political and economic discourse about inflation typically works to demonstrate the value judgements actors in these institutions have made about the relative desirability of decreasing unemployment or limiting the potential for prices to increase.

What’s also worth noting is that people have a notoriously bad track record at estimating inflation based on prices they encounter. Academics have been analyzing this phenomenon for decades – households in the US and abroad, across demographic groups, and over time consistently overestimate inflation rates. Part of the problem owes to how they may be surveyed on the topic. Evidence seems to indicate that how survey distributors frame questions about whether people perceive an increase in prices versus bouts of inflation have the potential to increase respondents’ estimation of inflation rates. As such, politicians willing to stoke fears of inflation – threatening that current welfare spending will lead to inflation that future generations will have to pay back, for instance, or that allowing governments of countries in crisis to delay repayment of debts paired with drastic tax increases and budget cuts while social costs proliferate – prey on popular misperceptions of actually observed inflation. When central bank employees invoke their duty to stabilize inflation in order to anchor expectations, they may not be quite honest about the degree to which perceptions of inflation match experience, or whether it would behoove the broader public to understand that actually, inflation is not that high.

Factors that may exacerbate the importance that people grant to inflation is how it’s written about and analyzed. How researchers phrase survey questions about the importance of inflation to households, and whether they believe that they observe inflation or not matters substantially for their responses. Economists have gone to elaborate lengths to reframe ‘inflation’ to survey respondents to see how important those respondents believe inflation is, which brings into question the relative importance of inflation to households overall. At the same time, when surveys ask people on the street about whether they believe prices are rising or if inflation is occurring, the relative neutrality of how those questions are worded contribute both to assessments of whether inflation is occurring, and if it is a problem. Persistent academic analyses of the importance of inflation and expectations of inflation for households’ behavior may shape media treatment of the topic, in ways likely to further stoke anxieties about inflation, and whether or not it is problematic for the average individual or household.

All of this worrying about inflation has the potential to shape economic views, assessments of elected officials, and voting behavior. However, the officials with the official purview to mitigate inflation are unelected, and the officials that may be better poised to shape those circumstances may be loath to regulate price-setting by firms, or to approve measures to increase spending on productive capacity that might lead to lower costs and prices by extension. Past experience during Biden’s time in office seems to indicate that Republican and Democratic officials that purport to oppose inflation may overestimate the potential for contractionary policies, fiscal or monetary, to curb inflation. How I approach this in my classes now is to emphasize the microstructures of these processes. How is the CPI constructed? How do aggressively pessimistic forecasts of future cost increases shape inflation expectations and forecasts? What are the mechanisms by which austerity measures or contractionary monetary policy actually throttle inflation? At what point must we leap from facts to value judgements, and meet those worried about inflation where they are? (There will be a moment!) Alienating people worried about inflation because they hear about it frequently risks turning them off to better solutions. This tendency is exacerbated by economists appearing to do all that they can to make survey respondents more anxious about inflation. If I succeed in getting students to re-evaluate their perceptions of inflation, and what the best responses to it are in practice, I have some hope that they may be able to convince their parents and others who may in turn reconsider some of their voting practices. Doing this requires compassion and changing up tactics, but it’s a key part of shifting the narrative starting in the classroom.

After the fact assessments of the 2009 responses

A long long time ago I wondered whether anyone besides Paul Krugman regretted past economic positions for insufficient radical ambition, and I was thinking about both macroeconomic orthodoxy (globalization good, inflation bad, fiscal deficits risky because inflation bad) as well as policy. Paul Krugman remains a good egg on this front; so, too, does Dani Rodrik. Brad deLong and Christina Romer both regretted the limited scope of what they did; Larry Summers, despite feints at expansive thinking, remains … less than repentant.

I felt great relief when the American Recovery Plan was passed, not least for what the bill contains, as for the potential it promises for future policy. JW Mason goes into far more detail about the broad strokes and particulars of what makes it revelatory, so I won’t belabor those details. But something else that delighted me is this piece in the New York Times by Astead Herndon, with the provocative title “Democrats, Pushing Stimulus, Admit to Regrets on Obama’s 2009 Response“. After lots of evidence of the Fed moving in ever more radical directions, unhampered as it is by Congress, and after Democrats’ movements in Congress toward a relatively expansive early response to the crisis that was subsequently quashed by Republican opposition (that may, ironically, have improved Trump’s chances in the presidential election last November), it’s good to see Congress resisting the quibbles of people like Larry Summers, Olivier Blanchard and the whims of would-be bond market vigilantes. I hope they stick to it, since there is still so much to be done.

David Graeber

I didn’t love David Graeber’s Debt. I actually got so annoyed with it that I stopped reading halfway through. But I could appreciate that the author cared, even if I thought he glossed over certain things, interpreted other phenomena differently than I did, and made such straw men out of economists that I felt compelled to write defenses of people that work at UC Berkeley.* Yet, even with those reservations, his writing could make me laugh, and I appreciated the gusto of writing a book hundreds of pages long presenting a grand history of debt, how it traps people, and why that is Not A Good Thing, Actually. And there was no arguing with the design of the book; the cover is spectacular.

There was a certain irony to my coming back to it when I did. Long ago, as a struggling grad student getting serious about my dissertation, I heard people in my department gushing about this book by an anarchist about debt; shortly after, this prophet-like figure ended up at Occupy Wall Street when I wanted desperately to be in Zucotti Park, but for nerves and a sense that I should really buckle down on that dissertation. I splurged on an ebook of Debt (less $ than the paperback), which promptly showed up as a corrupted file in the off-brand eReader someone had given me. I think I cursed, took it as a sign to get writing, and moved along. It may be that if I had read it then, my experience would have been different.

Years later, when I picked it “back” up (a new paperback copy) and started it, I also read the exchange in Jacobin, started by this piece, the response here, and the further rejoinder there. By the end of it, no one was really talking about Graeber’s book, which likely pointed to something deeper. Provoking thought and debate about big problems, and the structural components that shape them, is a worthy end. Thinking big things and writing about them is messy. I can appreciate, as the original critique did, the chutzpah of writing those grand narratives which launch a thousand thoughts, activists, or research agendas.

I thought a lot while reading Graeber. It reminded me, in a skewed way, of my two attempts as a college graduate to read Atlas Shrugged. When I read Ayn Rand’s book, I kept confronting my understanding of … everything. The role of the environment, who exploits whom and what that even means, what markets are really good for, and when they are so not up to the task that even George Mason University economics professors may agree. But reading and debating the author internally was wholly different with Debt: I liked the fundamental points Graeber was making, I loved his sense of humanity, and I’m hard pressed to think of a better anti-Atlas Shrugged than Debt, which celebrates giving, communal systems, and preservation. Reading Rand was a demoralizing grind; Graeber was more like an invigorating gauntlet.

Graeber has, since last summer, hovered close to the top of my consciousness often. It’s not hard, when one writes about debt and money, to have reasons to think about him. I read his screed against economics last fall with interest, tried to figure out why it annoyed me, and had to acknowledge that my discipline drives me crazy a lot of the time, too. Just this morning, before learning about his death, I thought about him while reading a review of a book that I wanted to compare to Debt, sometime, when time allows, et cetera. I would have needed to reread Debt to bring that to fruition, and I wondered if I really wanted to. I winced when he suggested that if anyone should be a global hegemonic force that it should be New Zealand, and when he argued with people who likewise wanted better for the world but questioned his particulars. But it was impossible not to smile when he wrote wistfully about not being able to find a book by Thorstein Veblen on a shelf at New York City’s biggest book store while he visited for a week, or when he responded to someone’s question about whether people in olden times ever made ad hoc amusements like water slides, just to have fun.

I think that what I failed to appreciate when I opened Debt for the second/first time last summer was the emotion with which he wrote. I had been filing down my emotional edge in paper submissions, and more successfully (I think) projecting a logical façade in my teaching, which both seemed like the proper things to do, and I may have been jealous that someone else could so bracingly do it to popular acclaim. Graeber never seemed to shy away from the moral impetus propelling his life, work, and writing. Way back when I wanted to read Debt the first time, I was angry about power and money in the world most of the time, and it bled into my writing. I still am, when I think about the state of the world economy, the power imbalances that hurt so many, and the structural violence of most debt structures on the global and domestic stage, but I have gotten better at compartmentalizing those thoughts and feelings. Or at least, before the Covid-19 pandemic. Graeber’s moralistic muckraking galvanizes; I aspire to that.

I read Graeber’s work with interest. I rarely expected to agree with it, at least on the specifics, but I knew it would make me think. His compassion shone through it all, even if I usually left a piece broadly agreeing about the problem, trying to figure out just what I objected to, why, and whether it mattered. I’m terribly sad about the news that he died; the world is much the poorer for it.

*No one should feel compelled to defend economists from UC Berkeley.

Thoughts about Making Capitalism Kinder:

On June 25, 2020, the New York Times published an op-ed by Darren Walker, president of the Ford Foundation, titled “Are You Willing to Give Up Your Privilege? Philanthropy Alone Won’t Save the American Dream.” Walker criticizes his peers leading billion dollar companies for creating mostly low-paying jobs, not paying taxes, and opposing welfare programs, despite their professed desire to increase economic opportunity, and argued that business leaders should commit to making capitalism a kinder system that would once again help people move up the income ladder, as it helped Walker himself. The piece echoes sentiments put forth by Mark Benioff, CEO of Salesforce back in October in his own New York Times op-ed, businesses should follow Salesforce’s lead with firm-level pay initiatives and increased philanthropy to make capitalism great again. These are laudable sentiments for corporate leaders and the heads of foundations that work with them to broadcast in the New York Times Op-Ed section. Unfortunately, there is no reason we should trust individual firms or CEOs to lead the way on reversing the inequity endemic to American capitalism.

Recent reporting on the economic consequences of the pandemic have emphasized stark failures of capitalism. Miles long lines of cars wait for food pantry aid, while farmers slaughter hogs and bury tons of root vegetables. Employers demanded workers in essential industries like meat processing risk exposure to the coronavirus, while they could not adequately distance, or reliably get medical care in the event of exposure. Before the pandemic, those workers were subject to UTIS from lack of access to breaks. Prisons, a source of labor for many companies globally, remain a major source of infection and site of outbreaks across the country. The mechanism of aid provision in the US – expanded provision of unemployment benefits – has left unemployed workers at the mercy of overtaxed and underfunded systems, while banks and landlords have been trusted to use their own discretion in determining whose obligations to defer or waive in the moment. Walker is right to call out his peers for their complicity at worst, and silence at best, but imagining that CEOs will undertake these changes without pressure from activists or the government borders requires superhuman optimism.

Firms affiliated with CEOs Walker praised in his piece illustrate this point. Benioff argued that firms should stop evading taxation, but in 2018, Salesforce had a market capitalization of $160 billion, and paid no federal tax in 2019. Ursula Burns, board member of Uber, has spoken about her personal fears of police racism, but Uber has helped destroy the taxi industry, hollowed out public transit usage in cities, and doggedly lobbies to classify its workers as contractors to avoid paying them overtime and health insurance. Paul Polman, former CEO of Unilever, may have lobbied for corporate support of the Paris Climate Accords, but Unilever was one of the largest global plastics polluters in 2019, and paid an undisclosed amount in 2016 to 591 former workers at a factory in India for getting caught knowingly exposing them to mercury in 2001. Though Unilever acknowledges that it only uses prison labor in a rehabilitative context, wages for incarcerated workers are below minimum wages, let alone market standards. Business leaders using their celebrity for political ends may have good intentions, but company-level policy cannot counteract how their businesses entrench inequity.

Walker and Benioff both lauded the Business Roundtable, an organization created in 1972 to improve the public image of business and lobby against governmental regulation, for an August statement arguing that corporations should maximize ‘stakeholder interests’ of employees, communities, and citizenry, rather than focusing solely on shareholders. Unfortunately, the Roundtable has done much to systemically undermine the social safety net for American workers through its opposition to taxes, corporate regulations, and expenditure on public works. The statement had no specific recommendations for its members. Meanwhile, more than three quarters of the Roundtable’s members’ (and their family members’) 2019 political contributions went to Republicans. Until members acknowledge that elevating stakeholder interests will likely reduce their profits, and back it up with commitments to pay workers more, bring wealth holdings out of international tax shelters, or to promote higher corporate tax rates, the public should assume that corporate leaders are using this as a PR exercise rather than signaling a willingness to change.

Walker is right to ask his peers to stop relying on philanthropy, but much of the outreach by the CEOs he praises amounts to charity. Benioff cited Salesforce’s philanthropic contributions of almost $300 million by 2019, while Ray Dalio, Bridgewater Associates founder, joined Bill Gates and Warren Buffett’s Giving Pledge in 2011, promising to give more than half of his then almost $90 billion over his lifetime.  Charitable tax deductions are regressive. Gifts to build new university boat houses and to purchase more meals for the homeless are rewarded equally by the US tax code, and tax write-offs for charity generate billions of losses in tax revenue yearly. Most organizations give only the annual 5% required to maintain their tax-exempt status, even as their endowments have grown considerably during sustained stock market rallies. Philanthropic organizations are unaccountable to voters or customers and nontransparent; private interests can withhold funds if criticized; and organizations from the Carnegies’ to the Sacklers’ have used their philanthropy to shield themselves and their corporations from public scrutiny. Titles like 2019’s “Silicon Valley Billionaires Keep Getting Richer No Matter How Much Money They Give Away,” should give readers pause. Private largesse will not improve the American income distribution, no matter the givers’ intentions. Concrete demands for peers like Benioff and Dalio would signal more willingness to attack systemic inequity.

The urge to make capitalism work better for the world at large is noble, and has a long history, from Industrial Democracy pre-WW1, to John Maynard Keynes, to Elizabeth Warren’s argument that “Capitalism without rules is theft.” A quick comparison between Benioff and Walker’s proposals with Warren’s campaign, however, reveals a gulf in specificity and scope. Warren’s campaign proposals included protecting rights to join unions, elimination of student debt up to $50,000, and a wealth tax that outraged billionaire Leon Cooperman enough to profanely accuse her of wanting to destroy the American Dream. Jamie Dimon and Lloyd Blankfein argued much the same. Corporate leaders waxing nostalgic for the shared growth of the post-war period should support measures that hearken back to the economic conditions of the post-war period including greater union membership, rising wages, and higher tax bills. Instead, high profile CEOs like Blankfein, a registered Democrat, argued that he would have an easier time voting for Trump than then-candidate Bernie Sanders on the basis of his economic platform, which was advised by the same people working on Warren’s. High-profile CEO endorsement of politicians like Jamaal Bowman, Mondaire Jones, Alexandria Ocasio-Cortez, and other Justice Democrats associated candidates would go much farther in signaling commitment to change, and making way for the sorts of policy reversals that Walker recommends. Using personal wealth to claim authority while calling for change, without promises for how elite leadership will change the system, is a hollow exercise. Racial inequality and environmental injustice owes much to the power corporate institutions wield in politics, and Walker is right to criticize corporate America for exacerbating these problems. But the actions of those he argues understand the problem – company-level policies and the philanthropy –fall short of the goals he states elsewhere in the piece. Billionaires serious about change should create specific and multi-level initiatives; lobby publicly and privately for those changes; and convince fellow billionaires to join. They should begin by paying their workers more, and by paying their taxes. In the meantime, activists and progressive Democrats should continue leading the charge for radical economic and political change.

Some things I’ve written in April and May, 2020:

In the hopes of getting back to posting at least once a month, here’s a small rundown of some pieces I’ve written in the past few weeks:

Economic Reporting on Hardships of Pandemic Should Focus on Market Failures” — for Fairness and Accuracy in Reporting, April 25, 2020

This op-ed touched on what made me feel optimistic about reporting on the economic crises associated with Covid-19 this time around compared with reporting on the aftermath of the Global Financial Crisis and a lot of mainstream reporting on the Eurozone Crisis. It also examined some gaps in reporting, which I thought should focus more on the market failures — and problems with capitalism — that I thought reporters were eliding from their analyses.

Learning All the Wrong Lessons From the 2008 Financial Crisis” — also for Fairness and Accuracy in Reporting, May 12, 2020

This op-ed was a little bit of a bait and switch — despite the title, I’m still impressed with NYT reporting on the debt build-up associated with the current crisis, mostly by not freaking out about it prematurely, but I talked about some language I found troubling in a relatively recent piece about the trillions of debt being accrued in present responses to the crisis. And they’re way better than the Wall Street Journal and the Financial Times on this front. It also gives a bit of a primer on what the problems associated with large debt can be, and why (I think) we shouldn’t worry too much about it right now.

The End of Capitalism: Ooh La La” — for Progress in Political Economy, associated with the University of Sydney’s Political Economy department, May 27, 2020

This appreciation and deep dive into Run the Jewels and Rage Against the Machine, re: protest music, was a lot of fun to write, and kick started by a twitter link to the just released video for Run the Jewels’ new single, “Ooh La La”. I couldn’t stop watching it. Before the current crisis, I wouldn’t say that I’ve spent a lot of time contemplating alternatives to capitalism; I think that amply applied reform can do a lot of good, which will likely trigger more action by workers, in a feedback dynamic. But the crisis and the tensions that it has laid bare — as discussed in the previous pieces — has me going back to Marx and Keynes and others. What I loved was how RTJ imagined the end of capitalism as something fun; joy pervades the video. But it’s a leap to write about music, especially music to which you feel connected, so I’d say it was also one of the more challenging things I’ve ever put together and submitted for public viewing. Shortly after posting it, someone on Twitter noted that I had no idea what a money gun is. Now I do. Later that evening, my husband looked it up, and I also got the designer of Killer Mike’s primary colored windbreaker wrong. Oops.

Stay safe out there, gang.

Coronavirus, Market Forces, and Contingent Teaching

It’s been a while, hasn’t it? Life was moving along: I was preparing drafts for resubmission, grading in flurries of activity, and incorrectly filling in travel funding applications, and before I knew it, we were all rehashing the 2008 financial crisis, which had once upon a time yanked me Vaudeville style down the path I would ultimately move academically, into uncertainty, finance, and ‘crisis stuff.’ But all in a slow motion horror movie fashion, somehow. What has become apparent, again, are the myriad structural problems and inequities of the global economic system, owing somewhat to bad luck (the spread of this particular virus), and in larger part to the flaws of a largely neoliberal economic system that privileges capitalist markets in directing economic activity with immediate and longer term political and social implications. And, on further consideration, the development of the virus and its spread owes much, too, to patterns of regional development, incursion into surrounding environments, and markets writ large.

In the early weeks, I did my best to pull together some thoughts about directions for policy, but then daycare was cancelled, and time felt even more divorced from my pre-March-2020 conception of it. Nevertheless, I’m continuing to plug away in a more disjointed way than I’d like, thinking about financial aspects of the crisis, the fiscal requirements of any response to the crisis, and the more structural aspects of the crisis, especially the need to reorganize the way that many essential industries and services in our US version of the capitalist market (yet still mixed) system to better serve humanity.

One of the things that was apparent to me, as an assistant professor who is still on the tenure track, was the large role that universities and schools in general have had to play in responding to everything. Of course I know that that’s obvious. Anyone with kids at home is living it; any teacher who has needed to fundamentally retool their curricula to suit our socially distanced moment is there, too. Lost in the shuffle of national reporting on this crisis seems to be the crucial role played by universities’ shift away from full time tenured and tenure track faculty toward non-tenured faculty, of the full time (lecturers) and the contingent (adjunct and visiting assistant professors) varieties.

So, in an 18 page brief that I put together and have been slooowly reworking into more polished standalone pieces that properly argue things rather than pointing out problems, I included the university system (and schools in general) as a region of society and the economy that governments should (1) give far more money, (2) actively take on the funding role, and (3) empower to improve in ways that “market forces” don’t encourage.* Chief among these are the arguments that (1) teaching is an essential service at whatever level, (2) teachers and professors should be paid more, and (3) teachers at all levels need more security in their professions. Successfully pivoting from one mode of teaching to another is arduous and takes finesse; if we believe that markets reward skills with higher pay, the evidence on this is a mixed bag with the most generous interpretation. If we instead believe that these are essential services and worthy of investment, we might simply decide, using the power of government, to dictate norms and provide ample and conditional funding on the promise that universities and schools do better by their faculty, starting with higher pay and extending more generous benefits and terms of employment that grant flexibility rather than requiring ever more flexibility from teachers themselves to those crucial workers.

But another structural aspect for redress is academia’s market driven drift toward contingent teaching. Lecturers and adjuncts who bear the brunt of teaching in order to give star faculty more time for research are vulnerable, period, to the whims of students, their tenured peers, and the vagaries of the economy. The postings on Twitter from contingent faculty not having their contracts renewed in this moment of intense need, but also when education is apparently (and obviously) important to so many, students and their parents, is a moment of nauseating cognitive dissonance. Maybe that’s just capitalism, baby, but we shouldn’t tolerate it.

Luckily, there’s an excellent piece weighing in on the structures and costs of this trend, and cogent arguments for changing it. In their article “Refusing to be cheap or flexible: labour strategy in academia,” for Overland, Australia’s “only radical literary magazine,” Doctors Michael Beggs, Senior Lecturer of Political Economy at the University of Sydney, and Rebecca Pearse, Lecturer of Sociology at Australian National University, have written about the perniciousness of this trend in Australia, where I’m sure things are still much better than in the US. (Lecturers outside of the US have standing parallel to tenure-track and tenured professors in the US.) The piece itself is equal parts diagnosis of the appeal of contingent teaching under capitalism and a cri de coeur to reject it.

Despite this work being based on Australian experiences, there are immediate parallels to the US experience. If we consider universities’ willingness to delay tenure clocks for pre-tenure faculty, we might remember that pre-tenure faculty are paid less than tenured faculty; this ‘makes economic sense’, where ‘economic’ is a crude proxy for the bottom line. At the same time, universities appear ambivalent to extending graduate students’ funding, despite the immense disruption to their work, as this adds to the universities’ outlays, in a time of genuine economic duress. Finally, when considering whom to cut from payrolls, contingent faculty with few, if any, job protections are most vulnerable, even as the effect on school enrollment may be ambiguous in the midst of a massive economic depression.

Plenty of forces are working behind the scenes here. Declining public funding of research increases pressure to apply for a diminishing pool grants to fund research in cost-intensive fields like the hard sciences, or to access expensive data for business, financial, and economic research. Star faculty, athletics coaches, and administrators have been wooed with ‘competitive’ pay, and (presumably) lost due to those pesky market forces before. Yet students are the bread and butter of most universities, and (ahem) the point of why we all went into this, right?

The market economy is going to get much worse before it has any hope of getting better. Endowment funded grants are likely to shrink further in supply as a consequence of market gyrations on a weekly basis, and tanking asset prices across the board. Students and their parents’ ability to pay tuition is ever more precarious, even as some pundits will start lecturing about skills and exertise and the value of education. Large universities seem to be considering pay cuts for administrators and tenured faculty; this would be a good gesture in a moment of sharing the burden. But if this is a moment for potentially radically reorienting our (national, global) economy and centering what we believe is important, and what our students and faculty deserve, why shouldn’t the federal government back stop the university system? There’s an inherent injustice in the notion that US universities should insulate themselves from fiscal crises by relying more on their own marketing, or that universities in states that continue to fund public colleges are perpetually at risk of budget balancing at the state level. Both strategies are vulnerable to shocks beyond their control; reliance on market forces to bolster tuition dollars and university prestige is a recipe for disaster, as we are currently seeing, and will only see more of soon.

*If you care, other industries/services that I think are too important to be left to ‘market forces’ are the provision of health care, journalism, the arts, care of children, elders, and families writ large, grocery service, and climate change related industries/services. Like I said, it’s a wide ranging document.

On that lunch with Lloyd Blankfein piece

There’s an interview in the FT making the rounds on Twitter — Edward Luce went to lunch with Lloyd Blankfein, the once upon a time head of Goldman Sachs, who oversaw those bonuses for executives after GS received bailout funds from the govt. He isn’t there anymore, but he’s a worthy synecdoche for Wall Street bluster and impunity. And the highlights are something else:

  1. He implies that it’s more obvious that Donald Trump cares about the economy than Bernie Sanders does.
  2. He argues that Wall Street’s lapses that begat the Global Financial Crisis were examples of stupidity, not criminal intent, as though that forgiveness is ever extended to non wealthy ‘victims of circumstance’.
  3. He makes a joke that he’s not worried about climate change since he lives on the 16th floor of his midtown apartment building. (Is Columbus Circle really Uptown?)

It’s tempting for me to paint Blankfein as a villainous caricature, but this interview actually arrested my day for a bit on Friday. He claims that he doesn’t consider himself rich (just ‘well-to-do’), owing to his working-class childhood. What he presumably means is that he doesn’t consider himself an ‘elite’; I was not expecting him to argue implicitly that he relates more easily to elevator operators and taxi drivers than fellow high-finance types. If he’s being honest about this, it could explain why it’s so easy for Sanders and Warren to get under his skin by using him as a stand-in for billionaires and corporate elites writ large. But it doesn’t explain a lack of sympathy (let alone empathy) for the positions that Sanders and Warren represent in their primary runs for the Democratic nomination.

He also argues that the only reason social services such as public education in the 1950s were so great was because of explicit sexism, locking smart women in primary school teaching and nursing jobs. Antonin Scalia made this argument, too, some years ago. Never mind that Finland seems to do alright by its student by, ahem, paying teachers more. This blank spot in Blankfein’s thinking expands to include the argument that ‘dopey regulations’ are what really holds corporate progress and economic growth back in ways that inhibit keep all boats from rising. Maybe? He’s light on the details about this, and plenty else in the interview, and the nineties experience with financial deregulation was hardly an unqualified economic success on any number of levels.

I think what keeps me thinking about this is that in some ways it may humanize Blankfein, while in other respects, it illustrates an ideologically driven man, though I suspect he’d disagree. He approached this interview as an adversary, bringing his rhetorical A-game. Luce cites Blankfein’s degree in history as the subject calls up periods of instability in a cycle going back to the Dark Ages in the shadow of the Roman Empire, rather than, say, the emergence of the Gilded Age from the social chaos, innovation, and corporate development of the late 19th century, and how it was a precursor to the various reform and progressive movements of the 20th century. He compares rentiers to antelopes being eaten by lions, though he keeps mum on who, exactly, the lions are. Are they the 99% of Occupy Wall Street? The 47% mooching class Romney disdained? Bernie Bros and Warren Stans? Anyone paying attention to the stream of scandals in which Goldman Sachs has played a major or minor role that wants some semblance of punishment for a very well-off corporation that seems to continue to prevail? And by the end of the piece, there’s a weird digression about Samurai. Where did that come from?

It’s hard to imagine that Blankfein, who has a (perhaps) twisted sense of humor, some critical insight into the events of the past though I disagree with the interpretation, and what I interpreted as a genuine sense of class identity, could fail to see the irony in how he comported himself in the interview or appreciate the apoplexies rising to the surface of his presumably composed interviewer. It may just be a magnificent trolling exercise. (He does make a big deal about being retired.) Bloomberg’s annoyance with Democrats in the recent debate for not appreciating his donations in the past echo throughout this piece; so, too, do references to how Blankfein might serve in a Bloomberg administration. My best interpretation of this interview is as a warning: there are perils inherent to allowing Wall Street to play the tune for the Democratic Party. Centrists take heed.

On Eichengreen’s “Democratizing the ECB”

I was procrastinating by closing some of the open tabs in my browser when I got to Barry Eichengreen’s January 14th piece for Project Syndicate, “Democratizing the ECB” — it’s short, and relevant to some of what I’m working on, so I finally read it.

His key argument (it is a very short piece! I shouldn’t have waited close to a month!) is that the ECB should increase transparency by releasing governing council members’ votes, as central banks like the Fed, the Sveriges Rijksbank, and others, do. The key argument against releasing this data, he argues, is that it could force nationally appointed council members to vote more narrowly on national (contra supranational) interest; he also argues that this worry is overblown, since:

“Such cynicism underestimates Europe’s central bankers. They may have made mistakes, but they have not shown a readiness to bend to popular opinion in order to retain their jobs. As important as their vote, moreover, is their ability to convince their colleagues of the validity and integrity of their arguments. Blindly obedient central bankers who lack this integrity will be unable to persuade their colleagues. They will find themselves isolated and consistently in the minority.” (Eichengreen, 2020)

Is it true that they will find themselves isolated and in the minority? Monetary hawks on the council have tended to come from European countries that suffered least during the Eurozone crisis, and it’s telling that when they no longer prevail in ECB decision-making, they seem to lash out in different ways.

Sabine Lautenschläger, the former German representative on the ECB’s governing council resigned last fall in protest of overly loose monetary policy decisions under Mario Draghi; her action followed her strong vocal opposition, alongside council members from Austra, the Netherlands, and France two weeks prior. Nor was she the first German council member, and monetary official, to resign from either the ECB or the Bundesbank in protest of European decisions (Jürgen Stark and Axel Weber did so in 2011). German newspapers dubbed Draghi ‘Count Draghila’, complete with pictures of the former head sporting fangs and a vampire cape, with splashy headlines about how he wanted to suck German savers’ accounts dry. And Hans-Werner Sinn now gets to complain that the ECB is no-longer independent. (Though he’s been doing so since July, and who didn’t see that coming.)

Time will tell how being in the minority affects core EMU members’ attitudes about policy, and their willingness to tolerate and abide the new ECB head Christine Laguarde’s changes. And it’s far from obvious how loosening monetary policy across the EMU — let along fiscal policy! — is even against German interests vis-à-vis growth. I’m curious about how accurate Eichengreen’s predictions are.