These are important reflections of how top elites in USA are thinking, so we just have to get around to noticing and discussing them.
There were two important articles in Foreign Affairs, the quarterly journal and associated website run by the Council on Foreign Relations. Yeah, yeah, the Council on Foreign Relations and the Trilaterals and all the tin-foil hat stuff notwithstanding, the simple fact is that some very powerful and very influential people have paid some eye-popping amounts of money to be counted as members of the CFR. And Foreign Affairs has a long, and I would even dare say, proud and enviable, history of publishing important articles that signaled major shifts or developments in USA policies, such as George Kennan's July 1947 X article explaining the new policy of "containment" of the Soviet Union.
The first article two weeks ago, "America in Decay," was written by Francis Fukuyama, the neo-conservative economics and political science professor whose 1992 book The End of History and the Last Man provided unceasing thrills and pleasure to USA elites by arguing that the collapse of communism in the Soviet Union and Eastern Europe marked not only America's victory in the Cold War, "but the end of history as such: that is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government." (That's what USA elites want to believe, and they get upset when we the people start showing signs that we're not happy with the new corporatist paradise they've constructed for themselves, and locked us in as their supposedly prosperous and cheerful serfs. That's a big reason why the Democratic Party's support for Occupy was so faltering and feeble.)
And here's the important thing, as far as Fukuyama and elites are concerned:
...liberal democracy is almost universally associated with market economies, which tend to produce winners and losers and amplify what James Madison termed the "different and unequal faculties of acquiring property." This type of economic inequality is not in itself a bad thing, insofar as it stimulates innovation and growth and occurs under conditions of equal access to the economic system. It becomes highly problematic, however, when the economic winners seek to convert their wealth into unequal political influence. They can do so by bribing a legislator or a bureaucrat, that is, on a transactional basis, or, what is more damaging, by changing the institutional rules to favor themselves -- for example, by closing off competition in markets they already dominate, tilting the playing field ever more steeply in their favor.In other words, the elites have noticed that their asset-bubble blowing economic schemes just aren't providing enough prosperity to keep everybody happy. And unless they can find some way to keep us peasants from resorting to the pitchforks, their wet dream of a democratic market economy as the end point of human history is in danger.
But it gets even more interesting, because at the same time, another article appeared in Foreign Affairs, entitled Print Less but Transfer More. This one was written by Mark Blyth, a professor of international political economy at Brown University and author of Austerity: The History of a Dangerous Idea; and Eric Lonergan, a hedge fund manager living in London and the author of - what else? - Money. The gist of their article is pretty well captured by their subtitle - and no, I am not making this up - "Why Central Banks Should Give Money Directly to the People."
...Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries' tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.Well, it's hard not to like the idea. Trying to stop the financial crash of 2007-2008, the US Treasury and the Federal Reserve gave $12.6 trillion in direct aid to Wall Street and the banks. That's just under $40,000 for every man, woman, and child in the United States. I don't know about you, but if I had $40,000 more in my bank account right now, there would be a lot of life's petty details I could stop worrying about. What would have happened if the Fed had given each of us $40,000 a few years ago, instead of giving $12.6 trillion to the banksters? Hmm, Goldman Sachs and Citi Group and all the other Too Big to Fail or Jail banks would have been flushed down the toilet bowl of financial history, while a few million of us probably would have moved to Canada or Costa Rica.
Of course, you will discover, as you read the remainder of the article, that this idea of throwing coins, albeit lots of coins, to the plebes is not really pure, unalloyed munificence.
To reduce the gap between rich and poor, the French economist Thomas Piketty and others have proposed a global tax on wealth. But such a policy would be impractical.Well, of course! We dare not even think of dragging down the top! Then note what a nice little scheme they propose: the central banks are not really going to mail you or me a check for $40,000 or whatever sum (which I'm sure will be much less than $40,000), but they're going to "invest ... assets in global equities" supposedly "on behalf of their citizens." I'm sure there are plenty of stock brokers and traders whose hearts are all a'flutter at the idea that the central banks of the world are about to start handing them trillions of dollars that are supposed to be invested "on behalf of their citizens." After a decade and a half, more or less, then these "equity holdings" could be distributed. The problem, of course, is the same as privatizing Social Security: there's every likelihood that most of "your" money is going to be gobbled up by management fees and commissions, if not lost to outright fraud and cheating.
There is another way: instead of trying to drag down the top, governments could boost the bottom. Central banks could issue debt and use the proceeds to invest in a global equity index, a bundle of diverse investments with a value that rises and falls with the market, which they could hold in sovereign wealth funds. The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries' GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens. After around 15 years, the funds could distribute their equity holdings to the lowest-earning 80 percent of taxpayers.
And then, what are people going to do with that money? Do they actually buy a new car or repair their house? Some will, of course. But how many will immediately book a flight to Vegas, or hustle down to the local convenience store and by arms full of lottery tickets? And even if we could somehow ensure that the money handed out by central banks to citizens was actually used in economically useful and productive ways, there's this big problem the US economy has, called "imports." We don't make our own shoes or our own clothes, or our own furniture anymore. Hell, even when you buy a car that is supposedly "American-made" nearly half its content components have actually been imported. So, much of the economic boost imparted by the "central bank to lowly citizen" transfer scheme is going to be felt by China and Vietnam and whatever other cheap labor hell-hole USA corporate management has found to rip-off and exploit.
And why do the central banks have to issue debt to do this? Why not just create money out of thin air? That's what central banks do. That's what they're supposed to do. That's pretty much where much of the $12.6 trillion came from.
This is why any talk about how we need to return to Keynes and Keynesianism makes me start to pull my hair out. While Keynes' idea that government has to step in to take up the slack in aggregate demand during a depression or recession is mostly correct, the fact is, other people had the idea before him. Most notably the Mormon banker Marriner Eccles, who Franklin Roosevelt appointed as chairman of the Federal Reserve system.
But the really bad thing about Keynes is that he does not argue that the programs and projects the government funds must contribute to the general welfare. We do NOT want to simply hire people to dig holes and fill them back up again. Nor do we want to just hand everybody 40,000 bucks and wish them luck at the slots or lottery machines. Keynes does not understand or appreciate the importance of republicanism as an organizing principle of political economy. So far as Keynes is concerned, it does not matter whether or not the American Revolution ever occurred. (Much the same critique is applicable to Adam Smith, also). For Keynes, a country ruled by the people, has no intrinsic value over a country ruled by oligarchs. But there are profound implications for economic policy making here: Are you trying to sustain, uplift, and better a country of citizens? Or are you trying to buy off and placate a rabble?
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