Yves here. Bill Black does a systematic and well-deserved vivisection of The World According to Thomas Friedman, using his latest column as a point of departure. One of Black’s remarkable finds is that Friedman acknowledged that deregulation and globalization would make financial crises “endemic,” yet couldn’t be bothered to consider that they would impose massive economic and political costs.
By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives
Part 7 of the MMT Series
Tom Friedman’s April 2, 2019 column concluded “The United Kingdom Has Gone Mad.” To which, the only possible response is – ‘you just noticed?’ The UK went ‘mad’ 22 years ago when Parliament elected the odious Tony Blair Prime Minister. I think many Tory policies were mad long before that date, but the Labour Party opposed them. The entire UK did not go ‘mad’ until Blair created “New Labour” and adopted Tory policies and became PM in 1997. Blair explicitly modeled the name and the adoption of neoliberal economic and military policies on Bill Clinton and the “New Democrats.” The UK became ‘mad’ when both of its major parties adopted the neoliberal economic and military policies that Friedman celebrates and proselytizes.
Friedman’s April 2, 2019 column was about Brexit, which understandably sticks in the craw of the populist spreader of the myth that the world is becoming ‘flat’ and a ‘hyper-meritocracy.’ The wealthy rig the world to make it tilt sharply. Plutocrats tilt it to ensure that a huge and increasing share of the world’s wealth flows to them. Friedman is the most infamous shill for those plutocrats. The plutocrats tilt and warp the economy unevenly to favor not simply the wealthy, but a favored subset that is typically the opposite of a meritocracy (kakistocracy). Worse, the world tilts toward catastrophe because the ultra-wealthy kakistocracy’s political pawns have produced environments so criminogenic that they produce our recurrent, intensifying financial crises. Friedman is shocked that one of the two epicenters of the global kakistocracy and plutocracy – the City of London – has forced the UK to follow policies so self-destructive and rapacious that vast swaths of the UK rose in opposition by voting for Brexit. The City of London, of course, hates Brexit.
Friedman’s column does not consider the data on the primary reason a majority of UK citizens voted in favor of Brexit – a policy he considers ‘mad.’ Austerity was the decisive factor that changed the expected vote on Brexit from ‘remain’ to ‘leave.’ (The linked article discusses what drove support for Ukip. That UK party’s single issue was pushing Brexit.) Polling data confirms that these predominantly working class voters devastated by austerity were the key to the public’s vote in favor of Brexit.
Welfare cuts and other austerity measures implemented under the Conservatives pushed vital swing voters to back Brexit and won the EU referendum for the Leave campaign, according to a new report.
Research published by the Social Market Foundation suggests the best indicator of a person’s referendum vote was not age or education, but happiness or sadness about their personal finances – with unhappy people tending to vote Leave and contented ones preferring Remain.
The report, which analysed the level of cuts in each area of the UK alongside each area’s growth in support for Ukip, argues that had it not been for austerity, the referendum would not have turned out the way it did.
It found that in districts that received the average austerity shock, Ukip vote shares were on average 11.62 percentage points higher in the most recent local elections prior to the referendum than in districts with little exposure to austerity.
As well as area-level analysis, the report looked at individual-level data and found that some people directly affected by welfare cuts shifted their political support to Ukip and rejected the political establishment.
“Households exposed to the bedroom tax increasingly shifted to support Ukip and experienced economic grievances as they fell behind with their rent payments due to the cuts,” the paper stated.
As much as 9 percentage points of the 52 per cent support for Leave – around 3 million votes – was decided by concern about austerity and related issues, the researchers estimated.
It suggests that without the effect of the “austerity shock” on welfare and public services, the Leave share of the referendum vote could have been as low as 43 per cent, delivering a comfortable win for Remain.
Austerity means that Modern Monetary Theory (MMT) is relevant to the story. MMT scholars protested against UK austerity and warned it would harm the recovery. It did. Austerity always inflicts its harm unevenly. It is an enormous economic advantage to the wealthy, and a horrific burden on the working class and the poor. In the UK context, that meant that austerity made the City of London elites that did so much to cause and profit from the orgy of “control fraud and predation” that caused the Great Financial Crisis (GFC) even wealthier while devastating huge parts of the UK inhabited by working class families. (“Control fraud and predation” is a criminology term that describes what happens when those who control a seemingly legitimate firm use it as a ‘weapon’ to defraud or predate on others.)
Friedman, Blair, and Clinton’s Four Defining Acts of Madness
Why did Friedman ignore austerity? The UK went ‘mad’ when Tony Blair championed four neoliberal policies that caused massive harm.
- The three ‘D’s’ – deregulation, desupervision, and de factodecriminalization
- The ‘race to the bottom’ between the City of London and Wall Street to attract the biggest, most fraudulent bankers
- The U.S. invasion of Iraq in 2003
- Austerity in response to the Great Financial Crisis (GFC)
Friedman, infamously, was among the most prominent cheerleaders for these ‘mad’ policies. Friedman loves ‘globalization’ and the most far reaching, dominating, and harmful form of it is global finance. Friedman has a ‘mad’ view about financial crises and globalization. In The Lexus and the Olive Tree: Understanding Globalization (1990: 462), he admitted that deregulation and globalization would cause immense harm. He was writing in the heart of the savings and loan debacle. “Global financial crises will be the norm in this coming era.” He added to emphasize that point: “crises will be endemic” (emphasis added).
Friedman was correct to admit that the policies he cheered would produce “endemic” financial crises. What he did not discuss was the “endemic” financial crises’ costs. He did not discuss how we should prevent the crises or respond to them when they occurred. Professor Alexander Field of Santa Clara University published a study in 2017 that estimated the U.S. cumulative output losses over the course of the GFC and its recovery as $41.7 trillion (Table I, p. 95). A trillion is a thousand billion. The figure for the EU should be substantially larger because its infliction of austerity slowed its recovery.
The U.S. figure, however, would have been smaller had President Obama not made his infamous pivot towards austerity and the “Grand Bargain” that he sought to negotiate with Republicans to weaken the safety net. It was really the Grand Betrayal of his campaign promises and the American people. Friedman does not want to discuss his praise of the three “De’s” and the “race to the bottom” between the City of London and Wall Street that created the intense “criminogenic environment” in both financial centers and drove the control fraud and predation epidemics that drove the GFC. Friedman does not want to discuss his praise of EU austerity and Obama’s effort to negotiate the Grand Betrayal.
Blair, Clinton and Gore, Obama, and Friedman went “mad” long before Obama sought to negotiate the Grand Betrayal. Consider Friedman’s admission that the trends he champions are certain to cause “endemic” global financial crises. That is a ‘mad’ trend. We desperately need to reverse it. The S&L regulators contained the ‘debacle’ before it caused any economic crisis, but it cost $150 billion to resolve. We did so by reversing the deregulatory trend. The Enron era frauds, at peak, caused a $7 trillion dollar loss of market capitalization and helped spark a moderate recession. The GFC caused a $41.7 trillion loss in U.S. output, a larger loss in EU output, a global financial crisis, and the Great Recession. If the trend continues, the “endemic” global financial crises will cause catastrophic harm.
What is Friedman’s policy answer to such a devastating trend? Friedman gives this sage advice in his column decrying the UK going ‘mad.’
What do the most effective leaders today have in common? They wake up every morning and ask themselves the same questions: “What world am I living in? What are the biggest trends in this world? And how do I educate my citizens about this world and align my policies so more of my people can get the best out of these trends and cushion the worst?”
What Friedman describes and praises is mad. It is mad to treat a “trend” as inevitable. Trends are the product of institutional factors that create incentives. Institutional structures – the three “de’s” plus a race to the bottom creates the perverse incentives that create an environment so criminogenic that it will produce “control fraud” and “control predation” epidemics so harmful that they will make global financial crises “endemic.” The “most effective leaders” would never accept “trends” that were so harmful. They would work on an emergency basis to end the trends producing “endemic” global financial crises.
Similarly, the “trends” on climate change are catastrophic. It is “mad” to accept those trends – we must urgently reverse those trends.
Friedman pretends to be vigorous on climate, but his own words demonstrate that he thinks the goal should be to “cushion the worst” harms. He wants to allow a suicidal trend to continue. That is mad.
“Effective leaders” do not ask: “what world am I living in?” They ask: “what world should we make?” We make our world through the democratic process when we create our institutions and our rule of law. When we create a criminogenic or predatory environment, we ensure that fraud and predation will become epidemic and crises “endemic.” It is mad to do so, yet that is what we have been doing for nearly 40 years. It is mad to continue a mad policy when we see it produce endemic and growing financial crises that cause catastrophic harm. Friedman is the world’s most willing apologist for the plutocrats that create these perverse environments. He celebrates their alleged brilliance and claims they are spurring huge gains in productivity. Data destroys his apologies. Productivity in the EU and the U.S. has fallen sharply during the period we have been making finance ever more criminogenic. That, of course, is what economists and criminologists would predict. Thinking that by eroding the rule of law to the point that we have made global financial crises “endemic” is a good way to spur economic growth is mad. Austerity and public bailouts of fraudulent financial firms is, however, a spectacularly effective policy to aid plutocrats and kleptocrats.
Friedman’s heroes and their ‘mad’ neoliberal policies made the world so criminogenic that global financial crises became “endemic.” Friedman’s heroes and their ‘mad’ decision to invade Iraq was one part farce and twelve parts tragedy. President Bush, of course, leads the list of those who were ‘mad’ when it came to Iraq. Again, the tragedy is that the leaders of both major parties in the U.S. and the UK shared this madness. Friedman was their most notorious cheerleader and apologist for their “muscular” military policies that invading Iraq epitomized. His ‘mad’ policies, 16 years later, continue to cause immense suffering and disrupt the Middle East. Friedman has a bro-crush on Blair, so his trademark obsequiousness to powerful males reached nauseating levels in his writings about Blair.
Two years ago, Friedman wrote a column praising Blair as the exemplar of the ideal leader, but admitting that Blair was enormously “unpopular” among UK citizens. The UK public despises Blair for championing the four acts of madness that produced the GFC, a ‘mad’ response (austerity plus bailouts of the City’s fraudulent and predatory bankers) to the GFC that made it far more damaging, particularly to the working class, and the catastrophic invasion of Iraq. The UK citizenry also detests Blair for his greed since leaving office in becoming wealthy by shilling for the world’s worst dictators and for his hypocrisy in presenting that odious behavior as ‘charitable.’ (Yes, he continued to copy Bill Clinton’s tactics after leaving office.) Blair got as wrong as it is possible to get wrong the six great issues he faced.
- Blair optimized the criminogenic policies that produced the epidemics of control fraud and predation that drove the GFC.
- He responded to that catastrophe by bailing out the biggest and worst bankers and banks.
- He failed to hold accountable those elite crooks and predators for their actions or even ‘claw back’ their gains from fraud and predation.
- He and his successor he chose created the self-inflicted wound of austerity that further enriched the elites and impoverished the working class.
- He championed and was the leading defender of the invasion of Iraq
- He disgraced his Nation after leaving office.
Friedman’s Juvenile Enthusiasm for ‘Muscular Diplomacy’ (Invading Other Nations)
Friedman ignores the reasons his nation despises Blair, except for Blair’s push to invade Iraq and defending it even when the facts proved that the pretexts for invasion were falsehoods and the horrific harm of the invasion became evident. Friedman, following our family rule that is impossible to compete with unintentional self-parody, presented Blair in and April 22, 2005 column as a martyr torched by an ignorant public for his courageous and ‘principled’ championing of invading Iraq. By that date, Friedman knew that the pretexts for the invasion of Iraq were falsehoods, that the war had caused catastrophic harm, and that invading Iraq had harmed the allied efforts in Afghanistan. The invasion had failed to produce a movement to real democracy in the Mideast, a fantasy that Friedman promoted. It was a strategic gift to Iran, which Friedman hates.
In deciding to throw in Britain’s lot with President Bush on the Iraq war, Mr. Blair not only defied the overwhelming antiwar sentiment of his own party, but public opinion in Britain generally. “Blair risked complete self-immolation on a principle,” noted Will Marshall, president of the Progressive Policy Institute, a pro-Democratic U.S. think tank.
Neither Marshall nor Friedman presented an honest ‘principle’ one advances by invading another nation on the basis of fake facts and turning the nation you invade into a vast charnel house. The U.S. and the UK lost lives and treasure and the invasion was a geopolitical blunder of epic proportions for the U.S. and UK.
Friedman’s claimed ‘principle’ was actually despicable propaganda.
Mr. Blair took a principled position to depose Saddam and keep Britain tightly aligned with America. He did so, among other reasons, because he believed that the advance of freedom and the defeat of fascism — whether Islamo-fascism or Nazi fascism — were quintessential and indispensable “liberal” foreign policy goals.
Saddam Hussein was many bad things, but he neither a ‘fascist’ nor driven by ‘Islamic’ views. He was notoriously secular. There is no such thing as ‘Islamo-fascism.’ That was a phrase invented by bigots to attack Islam. There are scores of anti-democratic world leaders. Deciding to invade and ‘liberate’ nations only when their populations were overwhelmingly Islamic is the opposite of “principle” – it is prejudice powered by propaganda.
Friedman’s April 22, 2015 column had to abandon the lies that formed the pretext for the invasion of Iraq. There were no ‘weapons of mass destruction’ (WMD) and Iraqis government had nothing to do with the 9/11 attacks on the U.S. Friedman was happy to supply new lies (‘Islamo-fascism’). By 2015, Friedman was at his most despicable and juvenile.
In sum, Tony Blair has redefined British liberalism. He has made liberalism about embracing, managing and cushioning globalization, about embracing and expanding freedom — through muscular diplomacy where possible and force where necessary — and about embracing fiscal discipline.
Seriously, ‘real men’ (gender intentional) embrace “muscular diplomacy.” We “expand[ed] freedom” by invading Iraq! In 2005, when he knew that the pretexts for the invasion were lies and the invasion had produced a catastrophe, Friedman enthused like a 16 year old boy about the masculine joys of “muscular diplomacy” (invasion) and chastised Democrats for not being sufficiently enthusiastic about invading Iraq.
[T]heir own ambivalence toward muscular diplomacy, cost Democrats just enough votes in the American center to allow a mistake-prone Bush team to squeak by in 2004.
The Friedman doctrine is that Democrats should have beaten the “mistake-prone” Bush by enthusiastically embracing Bush’s worst mistake – invading Iraq. How did that sentence not sound “mad” to Friedman when he wrote it?
Friedman is the exemplar of our family rule that it is impossible to compete with unintentional self-parody. He reached his lowest level, literally blasphemous, in a March 16, 2013 column claiming that Blair invaded Iraq in an act of selfless religious devotion to cure the ills of the world.
What does Tony Blair get that George Bush doesn’t? The only way I can explain it is by a concept from the Kabbalah called ”tikkun olam.” It means, ”to repair the world.” If you listened to Tony Blair’s speeches in recent weeks they contain something so strikingly absent from Mr. Bush’s. Tony Blair constantly puts the struggle for a better Iraq within a broader context of moral concerns. Tony Blair always leaves you with the impression that for him the Iraq war is just one hammer and one nail in an effort to do tikkun olam, to repair the world.
I leave the disproof of this blasphemy to the reader.
TheFaux‘Progressive’ Faux ‘Think’ Tank and Faux Growth
The obvious question is what the “Progressive Policy Institute” is that shared Friedman’s masculine joy about invading Iraq – a quintessentially anti-progressive and “mad” policy. It is the New Democrats’ and New Labour’s anti-progressive shop. At all times, Blair copied Clinton. A 2015 Guardian article demonstrated PPI’s message discipline and its blindness to reality. The PPI talisman was “growth.”
At Columbia University in New York this weekend, the Progressive Policy Institute, which helped Bill Clinton and Tony Blair pioneer so-called third way politics in the 1990s, held a closed-door strategy session for congressional staffers that was designed to find ways of promoting growth.
“There is no question that the prevailing temper of the Democratic party is populist: strongly sceptical of what we like to call capitalism and angry about the perceived power of the monied elite in politics,” said PPI president and founder Will Marshall.
“But inequality is not the biggest problem we face: it is symptomatic of the biggest problem we face, which is slow growth.”
Al From, a leading figure of the centre-left who chaired the Democratic Leadership Council during the first Clinton presidency, argues that a focus on inequality, though understandable after the banking crash, risks driving all candidates too far from policies that would promote growth.
“Culturally, the country has progressed a lot and we are not going back,” says From, who points especially to changing attitudes to gay marriage and women’s rights. “But the question is whether a major political party can sustain itself solely on cultural issues and can have a real shot at governing, if it doesn’t have a growth agenda as part of its programme.”
Representative Kind, the head of the House caucus of New Democrats and a strong Hillary supporter, was willing to give a quotation explaining that Hillary was lying about her opposition to Obama’s Trans-Pacific Partnership (TPP) in order to deceive Democratic primary voters.
“I’d lie if I said I wasn’t disappointed with the statement that she made on TPP,” says Representative Kind. “Everyone knew where she was on that and where she will be, but given the necessities of the moment and a tough Democratic primary, she felt she needed to go there initially.”
Al From, the long-time leader of the New Democrats, was willing to quoted presenting an even more cynical illustration of New Democrat realpolitik and another ode to growth.
Paradoxically, some New Democrats may even relish a Sanders resurgence, pointing to the similar experience of Ed Miliband and Jeremy Corbyn in the British Labour party, which they claim will ultimately prove the folly of pandering to the left.
“If we are going to be a governing party we have to [focus more on economic growth], but there is not going to be any pressure in the presidential process until we lose an election or two,” concludes From.
The New Democrats’ problems include nominating their candidate (Hillary) and losing to Donald Trump. The bigger problem is that they think that we should tolerate extraordinary “income inequality” to “promote growth.” What has happened to U.S. growth rates as inequality surged? Growth has fallen sharply. Epidemics of control fraud and predation cause (real) growth to become negative. Bubbles hide this reality by creating data that are nonsense, but once the bubble collapses, the real economic situation emerges. The collapse eviscerates growth, but the expansion of the bubble means allocates credit inefficiently, which harms growth. Austerity gratuitously increases the lost growth. The key to preventing this lost growth is an effective rule of law preventing the epidemics of control fraud and predation.
The New Democrats and Blair are terrible on each of these essential prerequisites of real economic growth. Bill Clinton was exceptionally lucky in the timing of his presidency. His supposed economic success was the product of the immense dot.com bubble and the even larger housing bubble. The housing bubble expanded throughout his eight years in office. President Bush continued Clinton and Gore’s assault on the rule of law by making even deeper cuts in federal banking regulators and ‘preempting’ state attorney generals’ efforts to stop the three epidemics of control fraud (plus predation) that drove the GFC. Clinton and Bush made the same promise – ‘deregulation’ would spur a sharp increase in growth. It did the opposite. An effective rule of law – and regulation is an essential aspect of that rule of law – is essential to produce real growth. When you strip away the bubbles, you strip away the Clinton and Bush growth and see the reality.
Blair, Brexit, and Friedman Show the Need for MMT Insights
Part One: The MMT Critique of Orthodox Microfoundations
Orthodox ‘modern macro’ is based on ‘microfoundations’ that implicitly assume that firms profit-maximize, that there are no negative externalities, that there is no market power, and that there is no control fraud or predation. In sum, they assume out of existence reality and particularly the parts of reality that produce the “endemic” global financial crises that Friedman admits his favored model produce.
Friedman, of course, loved both Blair and Brown. In the same April 22, 2005 column, Friedman described Brown as Blair’s “deft finance minister.” (Perhaps he meant to write ‘daft.’) In 2005, the UK was racing toward the GFC. It nosed Wall Street at the wire to ‘win’ the regulatory ‘race to the bottom’ that produced the epidemics of control fraud and predation in the U.S. and the UK that hyper-inflated bubbles and drove the GFC. The UK economy was sick in 2005. It was systematically misallocating capital. It was driven not by real industrial productivity gains, but by accounting scams in the City of London. The ethics of the City of London had fallen to sewer levels. Its biggest banks had been specializing in predating on their customers for two decades. Its most prestigious bankers were driving the two largest price-rigging cartels (Libor and Forex) in world history. Even the sleaziest U.S. bankers at the ‘vampire squid’ (Goldman Sachs) based their worst, most rapacious predators in the City of London. On any real economic basis, many of the UK’s largest banks were insolvent because of their terrible asset quality.
The UK was only two years before the first large bank crisis of the GFC – the run on Northern Rock. Only a government bailout saved the bank from immediate failure. Friedman, the triple Pulitzer Prize winner supposedly the world’s expert on ‘globalization’ was oblivious to reality. He believed the financial CEOs who wine and dine him and receive his unctuous praise.
Friedman’s 2005 column called the UK economy “strong” and “vibrant.” He attributed this to Blair and Brown embracing Friedman’s mantra – we all need to “to firmly embrace the free market and globalization.” The Brits think we are incapable of irony, and perhaps they are right about Friedman. To state the obvious, the City of London’s leaders despises ‘free markets.’ They love control fraud and predation and price-rigging cartels. Their business model is control fraud and predation plus price-rigging cartels. They love tax evasion, money laundering, and sanction busting. Those are sanctions against terrorism, which Friedman purports to love. They run criminal enterprises. They assist other criminal enterprises and wealthy criminals evade the tax laws. These financial control fraud and predation drove the fiction of the “vibrant” UK economy, which was actually a predatory and wealth-destroying economy. When the City of London reports enormous profits, we know that they are making the world poorer and sleazier.
The City of London’s leaders, like Wall Street’s leaders, are the most powerful generators of the ‘Gresham’s’ dynamic. George Akerlof explained and named the dynamic in his famous 1970 article on markets for ‘lemons.’
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.
Control fraud and predation mean that markets are neither ‘free’ nor efficient. Control fraud and predation cause market forces to become perverse. When cheaters prosper, markets harm consumers and honest business people. Finance is particularly important in this regard, for it ‘disciplines’ CEOs to maximize reported returns. Control fraud and predation are the easiest and surest ways to maximize reported returns. This means that finance tends to send enormous amounts of capital to the worst actors and deny it to the best, intensifying the Gresham’s dynamic in the real economy. (Financial executives also rake off enormous profits for themselves, further reducing efficiency and growth.) Globalization means that the harmful effects of the Gresham’s dynamic can now dominate industries globally. Again, finance is the whip hand of globalization’s most perverse incentives.
There is no such thing as natural “free markets.” A vibrant rule of law that effectively constrains control fraud and predation is essential to well-functioning markets. The ‘race to the bottom’ of regulation that the City of London (barely) ‘won’ over Wall Street eviscerated effective financial regulation in the two financial epicenters of globalization. This supercharged the Gresham’s dynamic, which produces endemic control fraud and predation. Blair and Brown were the two UK leaders most culpable for destroying any effective rule of law in finance. Effective financial regulation is essential to creating an effective rule of law, and an effective rule of law is essential to block the Gresham’s dynamic. When we regulate finance effectively we make possible, not harm, “free markets.” Markets without effective financial regulation are neither free nor efficient.
Blair and Brown did not hide from Friedman their zest for destroying regulation, particularly financial regulation, and ‘winning’ the race to the bottom against Wall Street. I have written two articles about this point. Blair delivered his most famous speech attacking regulation only one month after Friedman’s April 22, 2005 column praising Blair.
Blair most famously made public his war on regulation and his embrace of “winning” the regulatory race to the bottom in his May 26, 2005 speech on “Risk and the State.”
Blair explicitly cited regulatory restraints on financial control fraud that the U.S. adopted after the Enron-era control fraud epidemic as the exemplar of the rules he was most dedicated to never adopting. Blair admitted that because of his ‘light touch’ regulatory policies “the UK is very lightly regulated by international standards.” That was not sufficient for Blair. To ‘win’ the race to the bottom against Wall Street, Blair was dedicated to making the UK the weakest major financial regulator.
Blair bragged in his speech that he had ordered “light touch” regulation be the standard.
The new inspectorates will be actively charged with ensuring those doing well get a light touch approach….
At a time when UK financial regulation, in reality, was effectively non-existent, and UK financial control fraud and predation were epidemic, Blair claimed with all his faux sincerity that the City of London fraudsters and predators were the honest victims of rapacious regulators.
But something is seriously awry when … the Financial Services Authority that was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone….”
The UK satirical magazine Private Eye aptly labeled the FSA the “Fundamentally Supine Authority.” There was no major UK bank whose officers had “never defrauded anyone.” The FSA did not even slightly inconvenience, much less “hugely inhibit” any UK bank. The UK Parliamentary inquiry commission reported on a related and analogous disaster caused by “light touch” approaches.
The corporate governance of large banks was characterised by the creation of Potemkin villages to give the appearance of effective control and oversight, without the reality.
Friedman, the master of unintentional self-parody, celebrated how Blair had increased spending on “law and order.” Yes, at the same time that Blair and Brown eviscerated ‘law and order’ for elite white-collar criminals, they increased spending on ‘law and order’ for blue-collar criminals. Friedman cheered that combination.
Friedman, as late as 2017, was writing that the U.S. had a critical “need” to “enact sensible deregulation.” He had seen U.S. deregulation produce the fraud epidemics that drove the savings and loan debacle, the Enron-era frauds, and the GFC, UK deregulation produce the epidemics of control fraud and predation that caused the GFC, Icelandic deregulation produce the fraud epidemics that drove its financial crisis, and Irish deregulation produce the fraud epidemics that drove its financial catastrophe. This is another example of Friedman’s central madness – the belief that heads of state should allow horrific “trends” to continue and merely ameliorate the worst aspects of those trends. Friedman, however, wants to exacerbate the disastrous trend by increasing deregulation even though existing regulation is woefully weak.
Part 2: The MMT Macroeconomic Critique of Blair, Brown, Obama, and Friedman
The GFC and austerity devastated UK and U.S. growth. Austerity drove the “Leave” vote in favor of Brexit. Friedman and his heroes Blair, the Clintons, and Obama, betrayed the working class that was once the core of the Labour Party and the Democratic Party by adopting austerity in response to the GFC. Obama, who told the congressional New Democrats caucus that he was a New Democrat, initially supported stimulus, but he quickly abandoned it. That stimulus program was too small, but relative to the EU and the UK, it still set the U.S. on a path of a far quicker recovery from the GFC. By early 2010, Obama was working with Republicans to slash the safety net and increase the severity of austerity (the Grand Betrayal that he called the Grand Bargain). Fortunately, Tea Party Republicans were pretending to worry about deficits and they killed the Grand Betrayal because it did not do enough to rend the safety net. These policies were all ‘mad.’
Due to Blair and Gordon Brown, his chosen successor, the Labour Party was an enthusiastic promoter of severe austerity even before the GFC began. Friedman, of course, proclaimed this a stellar virtue.
[Blair] has made liberalism about … embracing fiscal discipline.
By “liberalism,” Friedman means the American usage. The three critical questions are: what does he mean by “fiscal discipline,” why does he think it is great, and why does he think American liberals should “embrace” it? Friedman does not even try to answer any of these questions. To him, it is self-evident that “fiscal discipline” is a virtue next to godliness. MMT, however, demonstrates that the budgetary balanceof nations with sovereign currencies are not matters of ethics. The contentsof the budget have great moral content. Spending massive amounts of money to invade Iraq is a grotesquely immoral budgetary policy. Failing to spend money to fix acute societal problems is inefficient and immoral. Failing to provide adequate stimulus in response to a GFC is self-destructive and immoral. Adopting austerity in response to a GFC is beyond stupid, self-destructive, and immoral.
Friedman was particularly impressed that Blair’s surpluses “helped the government pay down its national debt.” Orthodox economists tend to believe that running a surplus during an economic upturn is obviously desirable. MMT teaches that this is frequently not the case. Budget surpluses are leading predictors of serious U.S. recessions and depressions. There is nothing inherently virtuous about running a budget surplus even during a period of robust economic growth. A budget surplus may be a desirable as a means of reducing inflationary pressures when there is a shortage of real resources.
“I’m afraid there is no money.”
MMT explains why nations like the U.S. and UK with sovereign currencies cannot run out of their own money. Such nations are not remotely equivalent to ‘households’ when it comes to budgets and deficits. Blair, Brown, Obama, and Friedman illustrate the ignorance of money and the terrible harm that ignorance can cause. There is dumb, and then there is Brown’s appointee,
Liam Byrne, chief secretary to the Treasury under Gordon Brown, left a note for his successor that proved to be a gift for the Conservatives
The note said: “I’m afraid there is no money.”
The Tories, of course, made copies of the note and waved them at campaign rallies. The UK has a sovereign currency. It had an unlimited amount of its own ‘money.’ Real resources, not a sovereign currency, can suffer real shortages and those shortages can be important, e.g., by driving harmful levels of inflation. In a Great Recession, it is vital that a government with a sovereign currency adopt fiscal stimulus. Real resources are rarely so scarce in a Great Recession that there is any risk of fiscal stimulus causing harmful inflation. Stimulus is a win-win-win-win in those circumstances. It reduces unemployment, increases growth, reduces the ultimate deficit, and reduces the risk of a deflation trap.
New Democrats, New Labour, and Friedman, however, all favor austerity and think national budget deficits are immoral. Here are key excerpts from Byrne’s efforts to explain why he wrote the note. As one would expect from someone that would write such a note, his explanation is incoherent, delusional, and intended to excuse his failures.
The final years of Gordon Brown’s government were tough.
His leadership of Britain and the G20 at the London summit stopped the collapse of Lehman Brothers triggering a global depression – an incredible achievement we should never have stopped shouting about. But the recession slashed Treasury tax receipts by over £40bn, forcing us to borrow to keep public services on the go and get Britain back on its feet. And because the deficit was big, the responsible thing to do was draw up a long-term plan to cut spending.
In government, it was my job to craft a plan. As chief secretary, I spent bruising months negotiating £32bn of annual savings to help halve the deficit in just four years and set out in huge detail in our 2010 budget. Of course, the Conservatives attacked us – though it was the timetable they eventually delivered.
Those negotiations were tough and bruising. And so in my final hours of office, I was writing thank-you notes to my incredible team of civil servants. And then I thought I’d write one letter more to my successor. Into my head came the phrase I’d used to negotiate all those massive savings with my colleagues: “I’m afraid there is no money.”
Nearly every phrase of his excuse is false. Brown did not prevent a global depression – he was an important cause of the GFC. Lehman’s failure did not cause the UK crisis; UK bankers and anti-regulators caused it. A government with a sovereign currency does not have to ‘borrow.’ It, routinely, creates money through computer keystrokes. No, it does not follow that because a deficit is ‘large’ the ‘responsible thing’ is to plan to ‘reduce spending.’ The responsible thing is to increase spending, which can greatly speed the recovery and support future productive spending.
It is insane, in response to a Great Recession, to cut spending to “halve the deficit in just four years.” Byrne is describing a plan for brutal, self-destructive austerity. Labour’s austerity was sure to turn much of the UK into an economic anti-opportunity zone, sowing the seeds of Brexit. The fact that Byrne used the same economically illiterate phrase repeatedly with the UK Labour cabinet without a single minister telling him he was illiterate tells us how pervasive the rot was among New Labour’s leadership. I have written previously on this same rot infesting New Democrats.
In fairness, Byrne’s note was strikingly similar to one of the all-time stupid statements of another official – President Obama. In a C-SPAN interview that caused conservatives to chortle, Obama channeled his inner-Byrne.
SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?
OBAMA: Well, we are out of money now. We are operating in deep deficits….”
MMT is not simply an Ivory Tower theory. Finance professionals use it because it produces superior predictive results. If politicians like Blair, Brown, and Obama had studied MMT, they would have avoided many of their worst economic blunders that brought us Brexit and Trump.
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Amen to that. Now how to get the word out. What are the right words? This may be a long fight, I don’t know, but in the end it to me it’s the only one worth fighting. Not in some stupid way, but also not in liberal, someday sort of way. Thank you Yves.
I don’t think voters care about this. They know about defense waste and have never cared about deficits. After all, Shrub didn’t suffer for attacking government spending in 2000.
The problem is still the belief nominal center-left parties are still center left parties, and these politicians aren’t pressured the way they should be as a result. Take AOC, she’s good, but she’s good because she is a “generic Democrat. ” The recognition of this problem is the obstacle. HRC pushed that she and Sanders more or less agreed except she was “pragmatic.” She might be a C Street weirdo, but perceptions of her as a liberal were more important than anything she might have said. If HRC is 99% Sanders, why vote for Sanders?
HRC had no support with the 30 and under crowd and then the 38 and under crowd across the 2008 and 2016 primaries. These people besides facing a terrible world situation also were young when HRC was more prominent in the Clinton Administration. HRC didn’t exist in their world until she ran for President the first time or voted for the Iraq War (or worked to ban rap music). Especially in 2016, the people devoid of attachment to HRC in the primaries chose between a Southern Democrat and a “generic Democrat.” Two very different politics.
For me, it was an eye opener to realize how important Monica Lewinsky was when it came to derailing cutting Social Security. Bill Clinton wasn’t fighting Republicans on entitlements. The nominal center left elites who worry about deficits aren’t well meaning types in need of better information. They are the enemy.
I suspect AOC is not generic anything, but we probably won’t agree on that.
When Mrs. Clinton pushed that she was a responsible lefty, she meant she wasn’t left of anything and would avoid the dislocations to capital that Sanders might have pushed for, and which I think Black advocates.
We probably agree that the “nominally center left” are often centrists hoping to wear the garb of progressives for electoral purposes, but not for purposes of governing or economic policy. Until there are real left of center candidates and politicians, there won’t be much response to Bill Black’s critique. Which leaves us with how we can help put those politicians in power.
I don’t think the comment just above was meant to describe what AOC “is”. I think it was meant to describe what lost generic voters “think” she “is”. If I am wrong about that, I supposed I will get corrected.
The tragedy of the kakistocracy.
How satisfying it must be to write nonstop in the NYT and elsewhere promoting the interests of your own plutocratic class—at least his wife’s family. I suppose a ‘trend’ is what used to be called a ‘force’. The latter is not gentile enough for the fragile sensibilities of our overlords. Also it implies personal agency whereas trend is closer to something about consumer activity in Bergdoff Goodman’s seasonal sale.
It seems churlish to quibble with a point in such a well-written piece, but it is an important one because it is a commonly-repeated misconception and does lead to considerable misunderstanding and consequently poor analysis.
The pro-Brexit UKIP party was definitely popular — and had continued to gain popularity — in deprived, working-class areas which are decimated by austerity. But these were not, primary, the Conservative party’s concerns. They had never won those seats and were never going to. The problem was that, successful though UKIP was in de-industrialised areas, they were even more successful in the Conservative party’s heartlands. My mother-in-law’s constituency was about the safest seat for the Conservatives in the country. But even there, it was threatened by the rise of UKIP. No party can withstand election-on-election 10% swings to a so-called “protest” party. A couple more elections on that trajectory and the Conservatives would have been unable to ever get a majority again in any foreseeable circumstances. The response of sitting MPs was, if they wanted to keep their seats, to embrace hard (ERG-flavoured) vociferous eurosceptic policies and campaign on those.
But this constituency is just about the least deprived in the country (Christchurch).
So “austerity caused Brexit” is not completely incorrect, but neither is it the whole story. Certainly for the Conservative party, it was far more concerned about the erosion of its affluent voter base to UKIP than its (largely non-existing) poor working class or socially excluded from the labour force voters.
Why did hitherto Conservative stalwart voters turn to UKIP? Well, for certainly 30+ years, the U.K. was effectively a one-party-state, as far as membership of the EU went. You could vote for any policy you liked, so long as it was “Remain”. Both the Conservative and Labour Party machineries offered nothing else. As in any such situations where voters don’t have a political outlet via the existing political party frameworks, they (as the U.K. voters did) eventually go off and create their own alternatives. Cue, usually (again as in the U.K.) much wailing and gnashing of teeth from the “conventional” parties who find a whole new game is being played, but without them.
The research cited was from the apolitical-sounding “Social Market Foundation” which is, unfortunately, anything but. (this paper is typical of their output and the authors are Remain MPs). Ironically, considering the overall aim of the piece, the so-called Social Market Foundation is Ground Zero for neoliberal thinking. Here’s another example of the output from the SMF’s nonsense factory http://www.smf.co.uk/publications/nhs_innovation_productivity/ (“Whilst Novartis funded this project, it has had no input on the content of the report.” alright-ey; I believe you. Thousands wouldn’t)
I think this is implicit in the article. I call it the “shake the tree and watch the plums falling” attitude. Don’t you think, Clive, that it was austerity what eroded the tory base as many saw their revenues collapse?
No. This is such a misnomer, I don’t know where is came from.
You can look at pretty much any constituency and determine that deprivation did not correlate to a propensity to not vote Conservative nor to vote Leave over and above the percentage which the country as an average voted Leave in a provable way.
Let’s take the most marginal constituency in the 2015 election. Here’s how it voted http://geo.digiminster.com/election/2015-05-07/results/Location/Constituency/Derby%20North — notice the ramp up in UKIP voting and the swing to the Conservatives. Voters may have suffered under austerity, but not only did they not blame the Conservative party, they failed to see neoliberal (as it was at the time) Labour as any solution.
Derby is either significantly or extremely deprived http://dclgapps.communities.gov.uk/imd/idmap.html (you can’t shortcut and link to an area in the dataviewer so you have to type in the place name). It voted by a c. 5% percentage higher to Leave than the national average https://www.bbc.co.uk/news/politics/eu_referendum/results/local/d — but not-at-all deprived (in fact super-affluent) Christchurch voted Leave by an even greater margin https://www.bbc.co.uk/news/politics/eu_referendum/results/local/c
So austerity didn’t do the Conservative party, electorally-speaking, any particular harm (alas). Burgeoning euroscepticism hurt Conservative strongholds and Labour strongholds equally — threatening to turn both Labour and Conservative safe seats into marginals or turning marginals into unpredictable free-for-all’s with the eurosceptic vote holding the balance of power. This applied to both deprived areas and affluent areas alike.
I know it’s a comforting thought-form for Remain to believe that “People voted Leave because…” — as that allows the contrivance of a reason for Leave voters voting Leave. And that reason, whatever it’s presupposed to be, being, so those who cling to that notion must hope, amenable to being fixable. Far less rosy and digestible, though, would be the possibility that “People voted Leave because they didn’t like the EU”. As there would be little or nothing anyone can do about that.
OK. I wonder also what is the level of compromise of the remainers with the EU project. IMO, the UK has always been interested on keeping the EU as a commerce area with the least possible political ties and currently there is a lot of legislation emanating from EU directives. Are this “technicalities” behind the push for brexit? At least in part?
Personally, I don’t think it would need an awful lot from the EU to tempt enough in the UK back into, if not exactly being in adoration of the EU then at least seeing it as a necessary evil or the least-worst.
Some sort of mood music such as a “temporary break” on migration for “social responsibility reasons” (which could be crafted as something which sounds like it could be invoked but would need a lot of hoops jumping through first and have little practical effect but would have useful political optics and a lot of constraints such as you can only play that card say, one year in every five or something like that, with a 10 year sunset clause).
And a few crowdpleaser moves such as the Commission being seen to be forced to back down on some ridiculous nonsense Directive (like the “outlawing” of Daylight Saving Time). These sort of popularism-lite moves would cost little to nothing in terms of a material shift in the EU’s overall direction of travel but would give a significant boost to Member State autonomy or, at least, the appearance of autonomy. While this may sound terribly cynical, these subtle but important tweaks have an impact disproportionate to their “cost”.
It would certainly be worth a try. If I was the next president of the Commission, it would be the sort of thing I’d be willing to give a go. I really don’t think it would take that much of a change of emphasis (if not substance) to move the dial enough. Possibly better than any alternative anyone can think of.
I think there is evidence that many voters on both sides of the Atlantic display misplaced anger in their voting choices.
Which came first, austerity-induced misery, or anger focused on the EU in Britain’s case, and the Democratic party in the USA?
I think it fair to say that the immiserated in both cases do not have a deep understanding of the process by which they came to be miserable, but they have decided that they will do what ever they can to show their displeasure by refusing to go along with what they see, rightly, or wrongly as the ‘cause‘ of their misery.
In the case of the US, the miserable, whether understanding the exact nature the oppression they face or not, mostly not, but wishing a pox on both of the political parties, raised a proud middle-finger, and elected Trump.
I suspect the same is true in the UK, that is, whether their membership in the EU is the proper, ultimate target or not, the miserable see their plight as deeply related to conditions they see as being imposed from afar, with the cooperation of their own leaders, and when those leaders made the tactical mistake of ginning up the Brexit ‘issue’ for political gain, it blew up in their face.
In short, though the ‘real’ reasons are diverse and complicated, IMO, the horsepower behind the ‘successes’ of both the insurgencies was, and is, massive, creeping economic misery.
In the US, unfortunately, there is still a die-hard bunch who stubbornly ignore the democratic party’s collusion with their oppressors, and in the UK it looks as if there are many who think Brexit is a solution.
So far, our respective confusions continue to play into the hands of our oppressors, neither Trump nor Brexit are, or will be solutions to our misery, in fact both ‘solutions’ promise more misery.
I believe that a big factor in the disdain for the EU came from the cruelty with which the Greek financial crisis was handled, which showed the EU to be an authoritarian and vindictive organization completely enthralled to the the big financial interests and completely inured to the suffering of average people. The EU’s true colors were revealed. Likewise the Cyprus bail in. This showed the British people what the EU was capable of and what could lay in store for Britain given the right circumstances. This perception crosses class boundaries.
I think there are a variety of reasons people voted for brexit, however, I know a lot of conservative voters and a great many are either living quite hand to mouth or at least believe they are. It has long been apparent the Labour/Conservative divide is less about income but more class perception. I suggest I’m like the average voter, I’m quite happy to move in the desired direction as long as it allows me to live the way I want.
When I think the system is fair I support the government.
Make the population unhappy and hopefully things change, sadly often quite painfully.
There was also an element of Don’t Let Brussels Tell Us What To Do. That became a kitchen table issue for consumers of proper British Bangers, not a Eurofied imitation.
Did rising inequality play a role in this? As wealth and income get concentrated, people get left behind. They may not be on welfare, but are certainly not feeling all of the benefits of the neoliberal globalism. So you start to get slippage in safe seats.
The massive blunder that the politicians generally have made is making the pact with the devil by buying into the BS that allowing a small group to scoop up all the marbles will somehow improve things for everybody else. Brexit, Trump, Macron etc. are all signs that a threshold was crossed after the response to the GFC where the voters simply started checking the box “None of the Above” in the hopes that something different would occur as the regular ruling classes had failed.
There was an observation I heard which, while talking about the American context, may well apply to Brexit. Essentially, the argument was that the liberal #Resistance vs. the conservative MAGA movements do not constitute a struggle between classes or interest groups, but rather a struggle within the capitalist class for control over who is the favored sector by government policy. It’s the capitalists of the professional-managers, creative industries, the start-ups, versus the capitalists of old industry, the inherited wealth, the petty bourgeois used car dealers and air conditioner repair owners. The working class isn’t part of the equation.
Likewise, at least in the way it’s discussed in the mainstream British press, there may be a similar dynamic on Brexit. The debate is an intra, not inter, class conflict. It’s the capitalists that see benefit from globalization and free movement, versus the capitalists that see relative isolation and separation as conducive to their interests.
I just would add the guillotine tag. Reading this, anger escalates and escalates.
The only issue I have with this article is that although rightfully focused on Friedman, he is in line with the editorial board of the NYT. As this example that Bill Black signaled shows..
Ignacio link either does not exist or does not work.
Something weird happened. It is on Italy and piblic spending
http://neweconomicperspectives.org/2018/06/the-new-york-times-editorial-boards-incoherence-on-italian-austerity-and-the-euro.html
tom friedman is a good example of a cart before the horse.
tom friedman has been a joke for decades. It always make you think that when a person this apt to be wrong, gets picked to be a member of a prestigious group like “the council on foreign relations”.(which he has been since the eighties)…..that the fix is in. The hundreds of council members who brought us 9/11 and the iraq story, generally suffer from the same “groupthink”
You wonder why he is allowed to be so wrong about everything for so long, except when you see that he is a tool of dissemination of state propaganda. He is doing his part to propagandize the american public.
He may be a useful fool, an actually believe the worldview he espouses; or he may be a crass conman.I don’t know. But for the last couple of decades, he has a record of being distinctly wrong, like post 9/11 and pre/post iraq….the what,the why,… the guy was just clueless. yet , he keeps his good job…
So what gives? how is it that he keeps a good reputation when in fact he is akin to alex jones? I guess this is what he meant by hyper-meritocracy.
Worth remembering: thanks to his marriage, Friedman is a billionaire.
Thank you, Yves.
Black is on the money to call out Brown. He should have also called out the brains behind Brown and the Larry Summers’ vicar on earth, Ed Balls (Mr Yvette Cooper).
At an event in the City a couple of months ago, a former Bank of England senior official, and I mean very, very senior, explained how he was threatened with dismissal by the Treasury, then run by Brown, around the turn of the century when he persisted in asking for supervisory information from the Financial Services Authority, the supervisor set up when the Bank of England gained operational independence, but lost supervision.
The same person explained how when things got out of control in 2004, the Bank of England wanted action on a range of issues, including higher interest rates, higher bank capital, controls on bank leverage, details of conduct risk from the FSA and an impact assessment on the accession of new states into the EU, the Treasury threatened the Bank personnel. The former official would like the records opened now instead of having to wait for the thirty year and even longer rules. He said that Trump’s treatment of Powell is nothing like what Bank officials were threatened.
Four years later, in the spring of 2008, I arrived at the bankers’ trade body, the body that compiled and published Li(e)bor. I was informed how, for years, Ed Balls encouraged firms to inform the politicians and their advisers at the Treasury directly of problems with regulators and to name the regulators.
Brown’s underestimated role in the disaster is one of the mysteries of our time. Same with Ed Balls.
Thanks a lot for your insigths. Your anecdote explains so well how governments function in instant satisfaction mode like a voluble shopper. It is not even ideology. One doesn’t even need to blame neoliberalism.
Gordon: I need my credit growth and damn those pesky regulators and their risk assessment obsessives.
This is another anecdote on the predatory activity of banks. My wife was (now retired) risk manager for a mutual fund managed by a TBTF and from time to time she meets with her former colleagues. In the last meeting, one of them (a managing director) was commenting about a deposit-and-principal protected fund (guaranteed fund?) recently released with commissions attached higher that actual fund benefits but nonetheless having lots of subscription applications. He was laughing! A good example of this predatory kakistocracy William mentions. My wife is so happy for having left all that!
Interesting about Liebor. It was ground zero for perpetuating money as a commodity long after it was desperately obvious to all that the economy was one big ponzi. At some point everyone gets so exhausted they stop pretending and just blatantly go for it. If you give me a good price on my trade I’ll give you one back. That’s all it amounted to. And everybody thought creating market “liquidity” was such a mysterious process, basic to the very survival of capitalism. Not so. It doesn’t get any more basic than those wildcatters. And the tragedy was that the more they deregulated the sacred free-market the more chaotic it became. If you choose to run the world by a completely artificial system and pretend it is a self-regulating market you have to assume that it will spin out of all reach for control at some point. And then what? Well, you just make up cover stories and keep on hacking. MMT is the only sane voice. Too bad it has taken so long.
Thank you, Susan. Happy to elaborate in private and the connections between the Barclays banksters jailed last week, their boss and the Brit gunning for Trump and Corbyn.
yes. please.
Thank you, Susan.
I will ask Yves to put us in touch.
I stopped reading when I encountered this quotation:
I can’t tell from the quotation who wrote/said it. I guess it was the Grauniad’s writer. Obviously he never paid attention to the actual policies of the DLC, the New Democrats, or the Third Way. He never read Al From’s own book, The NEW Democrats and the Return to Power. From and the DLC were not to the left of center. They weren’t even in the center. They were unabashedly to the right of center, determined to attract the big donors from Wall Street, and determined to destroy the New Deal, which they called “outdated.” Clinton demonstrated his conservatism by adopting “triangulation.”
I stopped reading when I read him saying that Blair bailed out the banks. Uh… Blair left office in more or less disgrace in 2007. The first big bailout was a year away.
I am strongly predisposed to believe this author and his thesis, but this post feels like it’s written in purple ink, I’m afraid. Maybe it’s just the tone, to me reminiscent of US talk radio and an almost guaranteed turnoff to any UK readers. As a rule, people only talk like this over here if they’re trying to put one over on you, so if you’re *not* a fraud you should probably tone it down if you want to convince anyone from England…
Bankstas and their supporters have to be more feral now.
The fantasy finance asset prices have to be floated. The lie has to be maintained that banks were “fixed” after 2008.
But you have to know their ideology is 19th Century Social Darwinism (the basic root and ingredient of neoliberalism). They can accept fraud and criminality as long as it doesn’t change the status quo.
Here is Gresham’s dynamic, a favorite concept of Dr Black’s, as described by Anthony Trollope:
“[Melmotte is] a hollow vulgar fraud from beginning to end – too insignificant for you and me to talk of, were it not that his position is a sign of the degeneracy of the age. What are we coming to when such as he is an honoured guest at our tables? . . . And these leaders of the fashion know – at any rate they believe – that he is what he is because he has been a swindler greater than other swindlers. What follows as a natural consequence? Men reconcile themselves to swindling. Though they themselves mean to be honest, dishonesty of itself is no longer odious to them. Then there comes the jealousy that others should be growing rich with the approval of all the world – and the natural aptitude to do what all the world approves. It seems to me that the existence of a Melmotte is not compatible with a wholesome state of things in general.” -Sir Roger Carbury, “The Way We Live Now” (1875)
I was going to write a long comment on this article but then I thought better of it. Comparing Bill Black to Tom Friedman is a bit of a non-starter when you think about it. Bill Black has listed that he is an associate professor of economics and law at the University of Missouri-Kansas City. So then I went into Friedman’s background and found less than meets the eye. He has a degree in Mediterranean studies as well as a Master of Philosophy in Middle Eastern studies. And that qualifies him to speak on matters like globalization how? His background is as a journalist that wrote a coupla books and has a love affair with Israel going back to the 60s. I can just imagine a debate between Tom Friedman and Bill Black. Or Stephanie Kelton. Or Mark Blyth. Hmm, I’d buy a ticket to that.
The guy is a neoliberal and a neocon and that is not just personal opinion but is what is in his past. Seriously, you might as well have a debate with Rachel Maddow about Russia. Black has listed a whole string of misjudgements by Friedman but he will never lose his job because he will always say what is expected of him by the New York Times and the people it serves. There are a whole string of people like him in the MSM. And as far as digging into the Orthodox Judaic concept of Tikkun olam, well that is just bizarre. Especially since his idea seems to be to do it one Mk82 General Purpose bomb at a time to do it. Better he had gone into Orthodox Judaism and dug into the concept of False Prophets.
he married a billionaire, if i understand correctly, and has perfected the art of sucking up to that class (in a muscular way, of course).
Brilliant tour de force that charts a pathway through the thickets of propaganda, endless wars, fear and corruption over the past quarter century, the related loss of the rule of law in both the U.S. and UK, and the emergence and rise of the oligarchs’ kakistocracy, which must be reversed.
Particularly appreciated Bill Black’s proposed solutions. But while MMT neuters their austerity argument, it does not restore the rule of law nor reduce control fraud and predation by a very narrow but politically powerful and extremely wealthy segment of the population, nor reverse the use of wars and fear by that group. For that we will need to vote into office a different set of political leaders as a first step in what I expect will be a long journey to reverse the failed policies of the past forty years.
All the tectonic plates beneath politics are shifting. (overpopulation, migration, climate, pollution, peak oil, peak agriculture, ocean rise, the growth paradox, and lack of communication to name a few) The City of London may have hated Brexit but they had no love for the EU financial regulations that were forcing them to slow down. David Cameron claimed to be against Brexit; so too Theresa May. It must be a question of degree. Because both seem to be extremely resentful of EU regulations. The austerity imposed on the UK, by the UK itself, predated their participation in the EU. So they can’t blame it all on EU regulation. Sovereignty is the thing here. Even Merkel is talking about its importance to the successful governing of the EU. Fiscal authority should be a given – it should be the definition of government. Not finance. And both the UK and the EU are guilty of ignoring its importance. Just as we are.
In explaining both Blair and Brexit, I would add the role of Rupert Murdoch (and now Lachlan Murdoch) and the proven illegalities in getting out the Brexit vote.
On the former, see [https://www.nytimes.com/interactive/2019/04/03/magazine/rupert-murdoch-fox-news-trump.html], on the latter, see the many articles and twtr feed by the Guardian’s Carole Cadwalladr.
Thank you.
You’re quoting Carol Codswallop? Please.
I couldn’t find an appropriate quote by Enoch Powell.
I’m afraid that those whom Tom Friedman most admires are the ones licking their chops at the prospect of a hard Brexit.
The chaos and disruption, the mad swings in asset prices, the cries for austerity to right the economy and the ship of state, the subsequent loss of jobs, income, and public investment and regulation will be an unalloyed boon to neoliberals. Argentina and Chile without the rifles.
The likely result will be to turn Britain more than ever into Airstrip One. Barring the enclaves of charm and beauty inhabited by the holders of great capital, the New Britain will become a terra nullius offering an unrestrained opportunity to commercialize and redevelop.
Really? I don’t see how you can commercialize much if the economy’s been wrecked: that tends to be rather damaging to commercialization. Some of the loudest screams about this whole mess are coming from a rare combination of business and unions. When *both* of those longtime enemies are outright saying they’re panicking… (yeah, *perhaps* this shows that your policies will destroy those who profit from inequality — but more likely it shows that it will just destroy indiscriminately, so much so that even those who can normally hide from the disaster would be affected. You might as well applaud the Blitz because it hurt rich property owners. It hurt the poor more, much more, but each of them had less to lose, so its net effect was to reduce inequality. So too with this.)
Ah, our old friend Folly! The economy only works if people have at least enough money to buy the necessities and if they don’t it grinds to halt. No money, no buying, no economy and that is agreed upon by almost all economists I think. The speaker must know this. Who is paying him to say these lies?
Too bad Barbara Tuchman is not still alive as I think adding a chapter on the current insanity to her book The March of Folly would be good. Actually, I am going to push for reading this book.
Yeah, well America has plenty of them across the political spectrum. If the fools in charge do not start dumping neoliberal policies they might find it getting problematic to stay in charge. The Tennis Court of Versailles was over a century in the making, which caused bloodshed in amounts almost nobody saw coming, but honest, serious, open efforts at reforms could have prevented that anytime until then. I keep wondering when that meeting will happen this time. It is making me ill just thinking on this.
It’s a tossup between Friedman and Kudlow as to who’s most clueless.
Tom Friedman’s April 2, 2019 column concluded “The United Kingdom Has Gone Mad.”
No – misinformed. The only change the people could were offered and vote for, in an environment where they do not like austerity, was “Leave”. Relying on Rupert Murdoch for anything but his own biased opinion, fueled by a hatred of the English, was always going to yield the worst result.
The English have been so conflicted in the past: The 100 years war, the English Civil war, and 20th Century fascism. The results of any of these were not pretty.
I’ll be blunt, and disagree with Yves. There are three, and only three conclusions to Brexit.
1. Remain
2. Soft exit – dictated by the EU and is :Exit In Name Only, and has an large exit fee.
3. Crash Out.
Option 2, BINO, was never going to be approved by the hard core Brexitiers.
The current condition look to me like the basis for a Civil War. One can note the most recent example of a split was probably the American Civil War.
How many Friedman Units did it take for the Great Mustache of Understanding to figure this out?
That good paying job at NYTs gives Friedman influencer status. I’d much rather Mr. Black or Michael Hudson or Stephanie Kelton or Warren Mosler or Randall Wray were in the cat bird seat. I am attempting to get David Cay Johnston the premier financial engineer to challenge Meyer Lansky financial engineers with his Tax Code to come.
I see Goldman Sachs is reputed to embrace MMT now. Since the Treasury will defer to their desire for the unrestricted access to its power & money. Since we are their reinsurers post AIG, big surprise.
A great deal of what has happened to the majority has more to do with lack of enforcement of US law than because of it. The left are pushed into nothing like a revolutionary stance, but a counter revolutionary stance as they attempt to bring back the FDR American life.
As soon as the Blacks and the Women were to be getting into that Deal Thatcher & Reagan united to cut that out. Stop it.
Class War Generals are not wearing uniforms. I’ve seen pictures of the smiling Koch Brothers. The Class War Generals don’t work at their institutes, but just fund them. Persistence is affordable for them whereas protesters in the streets are there, (if not signing silly petitions to create funding request email lists) because they are out of work or right short of work that pays them enough to live.
The working classes need persistent Institutes of their own. Their representative’s offices are crammed by lobbyists. Paying the homeless to hold places for them, these lobbyists, is ironic & disgusting. (Thanks to AOC for the photos.)
Economists are to Financial Engineers what Scientists are to bridge building & aircraft engineering.
Mr. Black does a good, or great, or grand job describing who the enemies are and why.
I’d like to put him along with his colleagues, on a stage in front of the Treasury for a major mechanized march & TV event. Americans are as a society and culture most ignorant of Economics & Finance. For most capitalism is a paycheck.
Capitalism is equated with Democracy in the mental landscape.
It is not & is only a great thing in a democracy or republic, the later meaning representatives that work for the common good as their mission they understand to be their mission, when the laws created over its history are enforced.
Capitalism as a good thing requires regulation.
P.S. I forgot Russia.
Stop the presses! There was a referendum in 2016? The UK voted to leave the EU? The process isn’t going well?
I think we all owe Friedman a debt of gratitude for bringing this to our attention, and I look forward with anticipation to the next in the late-breaking-from-2016 series. I vaguely remember there was a presidential election of some kind…?
Thanks for this post. Maybe the joke is true: Tom Friedman’s brain is flat.
(It’s almost like the guy never heard of Samson… or Masada.)
MMT is a hot topic just now, with Paul Krugman and Stephanie Kelton, for example, exchanging long notes in public about its merits. Fairly typical, I think, of the NYT’s coverage is this: Modern Monetary Theory Finds an Embrace in an Unexpected Place: Wall Street.
[https://www.nytimes.com/2019/04/05/business/economy/mmt-wall-street.html]
Its author, Patricia Cohen, discusses Stephanie Kelton’s views and a few things that MMT seems to get right. She does not mention Bill Black, but does mention UMKC as one of the “academic strongholds” of MMT theory.
But Cohen bookends them with characterizations from mainstream economists who describe MMT as “garbage”, “crazy talk”, and “a confused mishmash that proponents use to support their political objectives.” Not that Chicago economists have ever shown a vested interest in the political adoption of their neoliberal views.
Cohen is the NYT’s former Ideas Editor, head of its theater coverage, and longtime reporter for its culture section. Naturally, she now covers the national economy. I don’t question her writing or ability to conduct interviews, but her street cred on economics seems a bit thin.
> The ethics of the City of London had fallen to sewer levels. Its biggest banks had been specializing in predating on their customers for two decades.
No, no, no, no. Do I dare point out that sewers are a good thing? I know it’s just a turn of phrase, trying to demonstrate a level of disgust towards the ethics of finance criminals, but if they were like sewers, they would quietly and honestly go about their business gladly taking care of society’s craps for minimal cost in an efficient manner, or in other words, be the good guys instead of the bad guys they actually are.
Also, where did we learn that sewers were a good thing? London! How soon they doth forget the Great Stink…