The American Bear

Sunshine/Lollipops

Jury in Apple Case Rules for Big Government | Dean Baker

It is remarkable that in a campaign season where the media are constantly telling us that the election is a referendum about the size and role of government, no one seems to have noticed that the jury’s verdict in the Apple-Samsung case is a big victory for big government. The ruling gives strong protection to Apple’s patents, which means that it will be able to charge more money for its iPad, iPhone and other related products in the years ahead. The additional charges could well run into the hundreds of billions of dollars over the next decade.

From the standpoint of consumers this has the same effect as if the government imposed a large tax on these products. However in this case, the government is simply agreeing to arrest competitors so that Apple can effectively impose the tax.

This is big government interference in the free market. Remarkably no reporters treat it as such. For some reason if it is not tax or spending policy, reporters generally fail to recognize the hand of the government. This is unfortunate since the impact of the government’s actions in setting the ground rules for the market swamps the impact of the tax and spending decisions that dominate public debate.

Our economic ruin means freedom for the super-rich | George Monbiot

"Neoliberals claim that we are best served by maximising market freedom and minimising the role of the state. The free market, left to its own devices, will deliver efficiency, choice and prosperity. The role of government should be confined to defence, protecting property, preventing monopolies and removing barriers to business. All other tasks would be better discharged by private enterprise. The quest for year zero market purity was dangerous enough in theory: distorted by the grubby realities of life on earth it is devastating to the welfare of both people and planet."

… Above all, the neoliberal programme has closed down political choice. If the market, as the doctrine insists, is the only valid determinant of how societies evolve, and the market is dominated by giant corporations, then what big business wants is what society gets. You can see this squalid reality at work in Cameron’s speech last week. “We have listened to what business wants and we are delivering on it. Business said, ‘We want competitive tax rates,’ so we are creating the most competitive corporate tax regime in the G20 and the lowest rates of corporation tax in the G7 …”. What about the rest of us? Don’t we get a say?

The neoliberal hypothesis has been disproved spectacularly. Far from regulating themselves, untrammelled markets were saved from collapse only by government intervention and massive injections of public money. Far from delivering universal prosperity, government cuts have pushed us further into crisis. Yet this very crisis is now being used as an excuse to apply the doctrine more fiercely than before.

So where is the economic elite? Counting the money it has stashed in unregulated tax havens. Thirty years of neoliberalism have allowed the super-rich to detach themselves from the lives of others to such an extent that economic crises scarcely touch them. You could see this as yet another market failure. Even if they are affected, the rich are doubtless prepared to pay an economic price for the political benefits – freedom from democratic restraint – that the doctrine offers.

A programme that promised freedom and choice has instead produced something resembling a totalitarian capitalism, in which no one may dissent from the will of the market and in which the market has become a euphemism for big business. It offers freedom all right, but only to those at the top.

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What We Owe to Each Other (Interview with David Graeber) | Boston Review

What we’ve seen over the last 30 years is a war on the human imagination. That’s the other starting point for this book—that in 2008 we had this crash, and all these assumptions we’ve been told we’ve had to accept for 30 years came crashing to the ground along with the market. One of them is the assumption that markets are actually self-sustaining. Obviously not true. Another one was that the people running them are competent. For years we were told that they aren’t very nice people—they’re greedy bastards, actually—but they know what they’re doing. All other systems just don’t work. These guys are incredibly bright, they’re incredibly competent. No, it turns out actually that they don’t even understand the working of their own financial instruments, or as far as they do, they’re engaged in scams. They trashed the entire system.

Assumption number three is that all debts ought to be repaid. Actually, no, debts don’t really need to be repaid, because AIG, who owes money, can wave a variety of different magic wands and debts can be made to disappear. Once you understand that the narrative we’ve been handed has been false, you’d think this would be the moment when you start thinking about larger questions: Why do we have an economy? What is debt? What is money? How could these things be organized differently? What do we need to keep and what do we change? You would think this would be the moment for international discussion about the basic assumptions that we’ve been making, and it seemed for about two weeks that it was going to happen.

The privatization trap | Mike Konczal

Privatization replaces the democratic role of citizens finding solutions to collective problems and transforms it into consumers trucking and bargaining in a marketplace. Finding solutions in a public space emphasizes accountability, voice, transparency, rules and claims through reasoning that goes beyond the self.  The market emphasizes cost-benefit thinking, profit-seeking strategies, bargaining and the satiation of individuals’ wants; good things in many circumstances, but not necessarily when it comes to the powers of the state.

A regime of privatization shifts the debate away from the functions of government towards the allocation of those functions. For all the talk about innovation by outside contractors, what privatization largely does is preserve the scope of government services while looking for efficiency gains. And since the scope of what the government does is held constant, the real gains come from minimizing costs.

Take prisons, for example. With the addition of privately run prisons, the debate narrowly focuses on how much to spend on prisoners. Minimizing costs here will often be the result of simply providing less of a good at a worse quality, and the debate will focus on the optimal extent of these privatization contracts. Meanwhile, the greater question of when the state should imprison people fades to the background.

What’s actually public about these responsibilities disappears from the conversation. Privatization assumes that cost quantifying solutions are more fundamental to government than any discussion of ethics or values. The move away from democratic accountability is particularly worrisome because in many of these fields, the ultimate motivator of private markets, the profit motive, is in direct conflict with the public administration. The basic values, concepts and institutions of liberal democracy — political participation, elections, equal distribution of individual liberties, checks on concentrated power — do not work towards economic competitiveness.

The ideology that the government is just one among many providers of goods and services is a seductive one in this age of markets. But the government isn’t simply just another agent in the market, and firms that are empowered to carry out the role of the state can be as abusive as the worst bureaucracy. [++]

Market advocates correctly note that markets have a wonderful ability to self-regulate in the public interest. When market advocates go on to argue, however, that the solution for market failure is to get government out of the way, they demonstrate remarkable ignorance of basic market economics. Markets self-organize in the public interest only if incentives align with the public interest. David Korten (via azspot)

(via lunaticprophet)

The larger context for this assertion of market fundamentalism is the ongoing political project to de-legitimise any collective action by ordinary people through government. Given the degree to which corporations and the wealthy dominate contemporary government, from the local to the national level, it’s not clear why elites are so flustered; they are the ones who benefit most from government spending. But politicians and pundits who serve those elites keep hammering away on a simple theme - business good, government bad - hoping to make sure that the formal mechanisms of democracy won’t be used to question the concentration of wealth and power. Conservative fantasies on the miracles of market | Robert Jensen

Conservative fantasies on the miracles of market | Robert Jensen

A brief explanation of state capitalism (the actually existing American economic system):

A central doctrine of evangelicals for the “free market” is its capacity for innovation: New ideas, new technologies, new gadgets - all flow not from governments, but from individuals and businesses, allowed to flourish in the market, we are told.

That’s the claim made in a recent op-ed in our local paper by policy analyst Josiah Neeley of the Texas Public Policy Foundation, a conservative think-tank in Austin. His conclusion: “Throughout history, technological advances have been driven by private investment, not by government fiat. There is no reason to expect that to change anytime soon.”

As is often the case in faith-based systems, reconciling doctrine to the facts of history can be tricky. When I read Neeley’s piece, I immediately thought of the long list of modern technological innovations that came directly from government-directed and -financed projects, most notably containerisation, satellites, computers and the internet.

The initial research-and-development for all these projects so central to the modern economy came from the government, often through the military, long before they were commercially viable. It’s true that individuals and businesses often used those innovations to create products and services for the market, but without the foundational research funded by government, none of those products and services could exist.

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[In Economics] you learn that markets…are based on informed consumers making rational choices. …Most of you have seen ads. Is an ad trying to create an informed consumer who will make a rational choice? …. Your not supposed to notice this……if we had a market system …an ad would be a description of the characteristics of the product… that is obviously not what an ad is. It’s trying to delude you into making an irrational choice based on lack of information. In fact one of the major goals of business is to undermine the market by making uninformed consumers who will make irrational choices.

Noam Chomsky - Global Hegemony: the Facts, the Images, April 20, 2011. (via evokit-notes)

I’ve always thought, the evidence was right there in front of our faces, if people actually were rational actors either the marketing directors would all have been sacked or ads would target our logic centers. It is painfully clear we humans are driven by emotion, economists should be embarrassed to have hung on so long to the myth of the rational actor.  

(via other-stuff)

(Source: youtu.be, via guerrillatech)

[We] can take a look at a rather perplexing example – a country that supposedly developed based on market principles and free enterprise – namely the United States. In the mid 18th century, the U.S was one of the richest societies (in terms of resources) in the world, yet it was pre-industrial. Adam Smith, the anointed father of modern economics, had advice for the 13 colonies. Smith requested precisely what today’s economists recommend to the third world, essentially advocating that the U.S maintain a commitment to its comparative advantages and sell what it’s best at producing. At the time, the U.S was most capable of catching fish and hunting fur, then exporting it to England, all while importing superior British manufactured goods. Perhaps unpredictably in the eyes of Smith, the U.S gained its independence from Britain, and proceeded to completely ignore Smith’s free market advice. Under Alexander Hamilton, the liberated colonies immediately set up high protective barriers (such as tariffs) to try to bar superior British textiles, then later British steel. This allowed the new country to construct its own manufacturing base under specialized protective barriers and by other forms of incredible state intervention. William E. Shaub

The Surprising Clichés of Economic History | William E. Shaub

On American Protectionism and the mythology of the GOP:

A brief look at the 20th century also reveals exactly this revelation, or the concept that the U.S did not develop and modernize because of a devout faithfulness to market principles.

Ronald Reagan is now considered a champion of free markets, and the 1980′s a decade in U.S history in which entrepreneurial economics flourished. According to a comprehensive review of the Reagan era in Foreign Affairs by Clyde Sanger, a Senior Fellow for International Finance at the Council on Foreign Relations, “The postwar chief executive with the most passionate love of laissez faire, presided over the greatest swing toward protectionism since the 1930s.”

Sanger noted some thematic irony, namely that advocation of market discipline is a tool used by those with power, who manage to avoid the ravages of the market as a result of astonishing state intervention. Those without power are then exposed to the free market discipline, and are therefore left with little, if any, protection from the subsidized structures of power. This theme is indeed quite dominant in the economic history of the past three centuries.

The Reagan administration was following a common course of action that has been in practice in the U.S (and elsewhere) for its entire existence. However, modern neo-liberals have shed new light on the free market theory charade. In 1995, Newt Gingrich extolled the victories of the free market and methodically issued tough lectures about the immoral culture of dependence of the American poor and working people. He did this while boasting rather proudly to the business community (the Chamber of Commerce) that Reagan had “granted more import relief to U.S industry than any of his predecessors in more than half a century.” In a scholarly review by Patrick Low, a GATT secretariat economist, he estimates that the restrictive effects of Reagan’s policies measured at approximately three times those of other leading industrial countries.

A major piece of America’s dedication to free market principles includes the massive transfers of taxpayer funds to private corporations, generally hidden under the masks of ‘defense’ or ‘security.’ However, pretending that these (purposefully) initiated transfers by the Pentagon to private industry weren’t economically effective isn’t, in fact, realistic. The U.S automotive, steel, high-tech, fiber-optic, airline and other industries would never have been able to survive international competition, innovate or develop through research without these fundamental violations in market principles.

Whether this radical protectionism in a state-guided mercantilist system is a position worth advocating is perhaps a worthy subject for debate, but its usage is unquestionably in substantial defiance of any standard (classical) free market theory in principle. Since our analytical focus is centered on the world as it is, our attention should be focused on really existing free market theory, or the economic theory that is actually applied.

Why Washington Ignores an Economic Prophet

Stiglitz is perhaps best known for his unrelenting assault on an idea that has dominated the global landscape since Ronald Reagan: that markets work well on their own and governments should stay out of the way. Since the days of Adam Smith, classical economic theory has held that free markets are always efficient, with rare exceptions. Stiglitz is the leader of a school of economics that, for the past 30 years, has developed complex mathematical models to disprove that idea. The subprime-mortgage disaster was almost tailor-made evidence that financial markets often fail without rigorous government supervision, Stiglitz and his allies say. The work that won Stiglitz the Nobel in 2001 showed how “imperfect” information that is unequally shared by participants in a transaction can make markets go haywire, giving unfair advantage to one party. The subprime scandal was all about people who knew a lot—like mortgage lenders and Wall Street derivatives traders—exploiting people who had less information, like global investors who bought up subprime- mortgage-backed securities. As Stiglitz puts it: “Globalization opened up opportunities to find new people to exploit their ignorance. And we found them.”

(Source: azspot)