New Issue!

by Chris Sturr | May 17, 2015


Cover of May/June 2015 issue

New issue!  Our May/June 2015 issue is out (for electronic subscribers; print subscribers will get their copies in about ten days).  We have posted one article from the issue, Marie Duggan’s timely piece A Way Out for Greece and Europe: Keynes’ Advice from the 1940s. Our page-two editorial note (written this time by my co-editor, Alejandro Reuss) is an unusually good guide to the issue this time, stitching together most of the articles in the issue under the (unplanned) theme of “Reform and Revolution”:

Reform and Revolution

For mainstream liberalism, it is an article of faith that our social ills can be fixed by this or that relatively modest government intervention. There’s certainly some truth to the view that economic outcomes—especially those of so-called “free markets”—can be improved upon by well-designed public policy. Even an honest neoclassical economist should recognize many instances of “market failure,” and so the need (at least sometimes) for government intervention. But political institutions in capitalist societies are not generally arranged so as to generate the right interventions—even “sensible” public policies that would seem to benefit virtually everyone, to say nothing of those that would benefit the majority at the expense of powerful elites.
In the exercise of government power, elites often hold the trump cards. The policies adopted often exacerbate social problems, rather than reducing them. Thinking of social problems as basically caused by the misdeeds of private actors coupled with the inaction of government, then, is not generally correct.
Susanne Soederberg gives a shining example in her cover story “The Student Loan Crisis and the Debtfare State.” Soederberg argues that the “consumer protection” framing of the problem—that the solution is to get government involved to rein in the predatory practices of private educational lenders—is fundamentally flawed. The “debtfare state,” in her view, has actively facilitated such practices. Government policy has pushed higher education into debt-based financing, and the state has acted as the enforcer of student debt obligations.

Christopher J. Cooper’s “Active Culture” article, “The Crisis at Corinthian,” provides a stark illustration—exposing not only the predatory practices a for-profit college educational chain, but also the Department of Education’s harsh insistence on full debt repayment.

Junji Tokunaga’s article on the economic policies of Japan’s Prime Minister Shinzo Abe, too, illustrates this point. There has been no lack of intervention by the Japanese government to address the country’s decades-long economic stagnation. However, policies that make perfect sense from a mainstream Keynesian standpoint—expansionary monetary and fiscal policies—have gone along with others that both favor elites at the expense of the majority and are likely to impede the country’s economic recovery—like tax cuts for corporations coupled with tax hikes on ordinary people.

In her piece on the current economic crisis in Europe, Marie Duggan points to a failure of political institutions to deal with trade and debt imbalances, except in ways that are extremely costly and painful for ordinary people. Europe’s main policy-making institutions have pushed—especially on Greece—austerity policies sure to inflict great suffering on the people and likely to undermine economic growth across Europe. Duggan points out that John Maynard Keynes developed a better solution way back in the 1940s: make surplus or creditor countries spend their surpluses (rather than hoarding them), which will boost demand for goods in the deficit countries, allowing the latter to grow their way out of debt.

Both John Miller’s “Up Against the Wall Street Journal” and Arthur MacEwan’s “Ask Dr. Dollar” point out that the burning problems in the U.S. economy—how to achieve sustainable growth and good jobs for all who want them—are not economic, but political. That is, we have the resources we need to solve our problems, but they are not deployed correctly because powerful interests stand in the way. MacEwan is quite right that life in capitalist America could be improved dramatically, even “without some drastic system change,” if only these barriers to reform could be overcome.

Jawied Nawabi’s “Primer” on land reform and its importance to economic development really gets to the root of the matter. Part of the case for land reform, he notes,
is economic—for example, small farms actually produce more output per acre than
large landholdings. However, the crux of the case is not narrowly economic, but “socio-political.” Land reform is so essential to economic development because the power of large landlords stands in the way of needed development policies.

In other words, you may aim at sensible, necessary reforms. But to get those reforms, you just may need a revolution.

Not a subscriber?  Click here to sign up online–we can get you an electronic copy of the magazine pronto.


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Monday Links: Rihanna, Baltimore, Jean Tirole, Private Equity

by Chris Sturr | May 05, 2015

(1) Rihanna, American OxygenThe video for this song from mega-pop-star Rihanna’s new album R8 is pretty interesting–with lyrics that seem to be about the so-called “American Dream,” and which could *almost* be a patriotic anthem, but with at least one line in some tension with that: “We sweat for a nickel and a dime, turn it into an empire.” This could be interpreted as the rags-to-riches hope for an “empire” of personal wealth (much like Rihanna’s, who is an immigrant from Barbados), but in the video, the word “empire” is accompanied by images of militarism and Wall Street. And although the video is festooned with American flags, they are deployed in so many ways and alongside video clips of police beatings, protest (Occupy Wall Street, Mike Brown signs, “I can’t breathe” signs), militarism, the burning Twin Towers, etc., that it is hard to take them as pure patriotism. The faux-patriotic-anthem aspect reminds me of Springsteen’s “Born in the USA,” and the use of historical footage is a great antidote to Billy Joel’s catchy but insipid “We Didn’t Start the Fire” (see a non-official video here, with a similar collage of historical images), which presents U.S. history as a series of famous figures, and something for which “we” are not responsible. I have seen mixed critical reactions to the Rihanna video on the Interwebs (and interpretations in the comments section on Youtube are all over the place), but at least you can say that the very short clip of an Occupy Wall Street banner might be the best promo that Occupy has gotten in many years, maybe ever.

(2) Baltimore links:  Here are some of the pieces I’ve come across that are worth checking out (hat -tip to TM for many of these):

(3) Nobel Prize Winner Jen Tirole and Takeover of French Economics:  Ann Markusen, University of Minnesota economics professor, sent along this:

I’m forwarding a disturbing essay that Evan Jones, my grad school colleague and Political Economy professor at the University of Sydney, forwarded about the recent movement for heterodoxy in the French Economics academy and the powerful pushback.

Explains Evan:
An online daily Mediapart has a small English language section where they put up the odd translation, including this one  – a jaundiced view of the recent second French big shot (after Piketty) to appear on the world stage.

Tirole’s Toulouse school is known at the most orthodox (in the American sense) department in France.  Unfortunately, economics teaching in French universities is apparently rather pedestrian everywhere. The handful of assertive dissident economics (Frédéric Lordon, Jacques Sapir) I think are mostly in research outfits. And they rarely get invited onto the mainstream French media, which is full of flunkeys.

Here is the article, by Laurent Mauduit of Mediapart: How Nobel prize-winner Jean Tirole led the private sector takeover of French economic studies.

(4) Private Equity and Pension Funds:  I am slowly working my way through a book I should have read right when it came out a couple of years ago, Private Equity at Work: When Wall Street Manages Main Street, by Eileen Appelbaum and (D&S associate) Rosemary Batt. It’s great.  There’s lots in there about the huge irony of how public pension funds–“labor’s capital,” as former D&S co-editor Adria Scharf called it in a 2005 D&S article–are the biggest funders of private equity, but private equity is all about slashing jobs, outsourcing, “deunionization,” and all kinds of other worker-unfriendly activities.

I thought of this when I saw a recent piece in Fortune: Public pensions own payday lender that is illegal in their own states, about how New York and New Jersey public pension funds have become indirect owners of the nation’s second largest payday lender, ACE Cash Express Inc., as limited partners in an investment fund of the private equity firm JLL Partners. But, as the Fortune piece points out, payday lending is illegal in New York and New Jersey. Pension funds in Montana and California are also investors. Here’s a good quote from the article:

“From a business perspective, these deals can be brilliant because they are cash-flow positive, have return customers, and the government [is] always trying to catch up on regulation,” says James Zhang, a former private equity investor who is now an executive with consumer finance education website NerdWallet (which argues that there are better loan alternatives for the unbanked). “But not if you have a moral compass. Imagine teachers in low-income areas learning that they’re funding a company that profits off the backs of their students or their students’ parents.”

(Or imagine workers’ pension funds funding companies that profit from layoffs, union-busting, outsourcing… But of course we don’t have to imagine that.) As the Fortune piece points out, though, it’s not clear that the JLL Partners fund that includes ACE Cash Express will even turn out to have been a good investment for the pension funds, moral (and political) issues aside. And that’s often the case with private equity, especially since the financial crisis, according to Appelbaum and Batt.

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