New Issue!

0715cover--for-blogOur July/August issue is out!  We have posted two articles:  our cover feature, an interview with Gerald Epstein of UMass-Amherst:  From Boring Banking to Roaring Banking; and John Miller’s “Up Against the Wall Street Journal” column, Trans-Pacific Partnership: Corporate Power Unbound.

Here is the issue’s p. 2 editorial note:

Are You Pulling My Leg?

Hearing some of the justifications offered for dominant economic policies and institutions today, readers of Dollars & Sense may wonder, “Do they really believe this? They must pulling my leg!”

Harvard economics professor Gregory Mankiw, writing in a recent New York Times “Economic View” article, for example, declares the case for “free trade” a “no brainer” among economists. Mankiw engages in the usual sleight of hand: slipping seamlessly from the benefits of international trade, to the desirability of “free trade” policies (deregulating international trade), to support for contemporary “free trade” agreements (which are primarily focused on deregulating international investment and finance, not trade in goods). We might agree that this is a “no brainer,” but not in the sense Mankiw means. The argument is convincing as long as you don’t actually think about it.

In this issue of Dollars & Sense, we have several examples of similar justifications.

Economists Anita Dancs and Helen Scharber take a look at the criticisms of the “local food” movement coming from mainstream economists. Here, the economists’ main case for a “10,000 mile diet” (as one recent book put it) is actually quite similar to the one for “free trade”—based on what Dancs and Scharber call the “CASTE paradigm.” Comparative Advantage, economies of Scale, and Trade, the mainstream economists claim, lead to greater Efficiency. While Dancs and Scharber don’t think that “locavores” have got it quite right, they emphasize that the existing food system is hardly the result of markets untouched by government intervention (subsidized water, anyone?) and that, in any case, unfettered markets would not lead to socially efficient or equitable results.

Gerald Epstein takes us into the world of high finance, and the transition from regulated “boring” banking (from the New Deal to the Reagan Revolution) to the terrifying “roaring” banking of the post-deregulation era. Again, economists claimed that financial deregulation and innovation (like new-fangled securities) were going to deliver vast benefits—fueling new productive investment, making it easier for people to save for retirement, helping families and businesses manage risk, and so on. (More than a few of the economists who made such arguments had undisclosed ties to the big financial firms themselves.) How did that work out for us?

In the “Economy in Numbers,” Raul Zelada Aprili and Gerald Friedman look at the consequences of so-called “Washington Consensus” economic policies (or “neoliberalism”) in Latin America. Mainstream economists and the politicians they advised took advantage of the Latin American debt crisis of the 1980s to discredit the government “import substitution industrialization” policies of the 1950s-1970s—and to push for a profound “free market” restructuring of the region’s economies. In fact, economic growth was significantly faster during the import substitution era than during the heyday of neoliberalism—and has accelerated in the last decade, as governments across the region have turned away from neoliberal policies.

The thing that we need to keep in mind is that, though “neoliberalism” may sound like a belief system—the word does end in “ism,” after all—it is really more than that. It describes a set of economic policies or institutions. The ideology of neoliberalism, the unflinching belief in “free markets” everywhere and for everything, lays atop the interests of global capital. Claims that financial deregulation would benefit us all—and the imperviousness of finance to significant reform in the wake of a disastrous crisis—reflect the political power of what Epstein calls the “bankers’ club.” The CASTE paradigm, likewise, is not just a set of fallacious arguments, but a defense of the existing distribution of power in the food system and in society more generally.

That’s what we need to realize. They’re not really pulling our leg. More like twisting our arm.

Also: Rob Larson explains how “Money Yells.” Part 1, in this issue, focuses on the political economy of the internet, and recent battles over “net neutrality.” Kristian Williams explores the race and class underpinnings of policing. And Steven Pressman reviews a defense of Social Security, just as we’re about to celebrate the program’s 80th anniversary.


Thursday Links: “Fix Our T,” SEC, TPP, etc.

Fix-Our-T-Petition(1) Fix “Our” T:  On my walk from Boston’s South Station to the D&S office this morning, I encountered an army of people in red “Fix Our T” t-shirts asking commuters to sign a petition to “Fix Our T.” (The “T” is Boston’s public transit systems, including a subway, buses, and commuter rail.) When I asked one of the petition-wielders what it was all about, she mumbled something about “increasing transparency and accountability.” I said that wasn’t enough information for me to sign anything, and asked if she had any handouts. (Lots of other people were just signing–people are really fed up with the T, especially after terrible service this winter in the wake of multiple blizzards!) She gave me a flyer which revealed that the petition was to “tell Beacon Hill [the state legislature] to work with Governor Baker and fix our T” and to “to adopt the responsible bipartisan reform proposed by Governor Baker.”

It turns out that the website mentioned on these people’s t-shirts,, was put up by a group called the Coalition for a World Class public Transit System. It is made up of area chambers of commerce (the North Shore Chamber of Commerce, Metro South Chamber of Commerce, etc.), industry organizations (Massachusetts Lodging Association, Massachusetts Restaurant Association, Massachusetts Petroleum Council (!)), and free-market, pro-business lobbying organizations (the Massachusetts Business Roundtable, Massachusetts Taxpayers Foundation). The list of “solutions” to the T’s problems is mostly bland and meaningless, but key items tip their hand as anti-union (“Provide greater accountability and transparency for the T’s governance and management practices to ensure the entity is efficiently and effectively run while employing a productive workforce”) and against increased funding for the T (“Ensure that the T balances its operating budget without the need for ever-increasing state assistance each year”). So it’s pretty shady to be asking commuters to sign a petition without revealing that this is a big business group with an agenda that many commuters would disagree with.  (As my co-editor Alejandro Reuss likes to point out, nobody ever suggests that the military should “balance its operating budget without the need for ever-increasing state assistance each year” they way fiscal conservatives seem to think actual public goods like Social Security, public transit, or USPS should.)

At least the Boston Globe got it right about the petition with this story: Business Groups Lobby in Favor of Baker’s MBTA Plan. All these pro-business organizations give the lie to the claim (however technically true) on the group’s Facebook page to be a “nonprofit organization,” and also makes you wonder what they mean by “Our” T.  It reminded me of a Short Run from our April 1975 issue that we republished in our Nov/Dec 2009 35th anniversary issue:

You Make It Work (April 1975)
The Reader’s Digest editorial staff is preparing a year-long series of articles defending the U.S. economic system. The Business Roundtable, made up of top executives of 150 major corporations, is paying $1.2 million for the series, which will run under an “[advertisement]” label in each month’s Digest and will be placed in 50 college newspapers as well.
The chairman of the Business Roundtable public information committee, which will supervise the series, is Vice President Paul M. Lund of AT&T. The title of the series is surprisingly up front (emphasis added): “OUR Economic System—YOU Make It Work.”

(2) The SEC:  Rootstrikers has a new report out about how compromised the current head of the Securities and Exchange Commission is, Mary Jo White, the SEC, and the Revolving Door. It is a great follow-up to Elizabeth Warren’s June 2 letter to White criticizing her performance at the SEC, and it is a great riposte to the notion that White would be someone Wall St. wouldn’t want to “mess with.” From the executive summary:

A deeper dig into White’s career indicates that not only has White’s tenure at the SEC
been troubling, it has been a disappointment very much in keeping with her
professional track record. Her defenders are right in one very important regard: White
has in fact led the SEC exactly as one might expect she would based on her career.
White’s career serves as an emblematic example of what is problematic about the
revolving door; indeed, she is also a proponent of the revolving door in her hiring and in
her personal statements. Her position on the SEC leads to an insolvable dilemma: her
lengthy and lucrative ties to Wall Street (Section A below) lead to justifiable calls for
frequent recusal, and her frequent recusals (see Section F) lead to frequent deadlock in
the commission, preventing adequate enforcement. White’s tendency to hire people
for high ranking jobs at the SEC who are likely to avoid stringently enforcing laws
protecting society from the dangers of the insiders and large banks for whom they will
go to work for next (see Section E) is emblematic of her ideology opposing strong white
collar criminal enforcement (see Sections (C) and (D)).

Here’s something from Bloomberg Business about the report:  SEC Chair’s Conflicts Fuel Sympathy for Wall Street, Group Says.

Meanwhile, Bloomberg Business also reported (here) that the SEC could act as soon as August 5th to (finally) implement a Dodd-Frank rule “that will force public companies to publish a ratio that compares the chief executive officer’s reported pay with that of their typical worker.”

What I find hilarious about the resistance to this rule is that corporations, exhibiting that “can’t do attitude,” have been whining about how much time it would take for them to calculate the pay rate of the “average” worker (with the median pay). But the Stanford University Engineering website has a delightful piece explaining how a doctoral student there, Michael Ohlrogge, figured out a way to do it using statistical sampling:

He began to contemplate how the SEC might use statistical sampling to calculate the required median compensation at a reasonable cost. His quantitative training in engineering had taught him that highly accurate statistical estimates could be derived using relatively small samples drawn from large populations. On the other hand, his legal training taught him that the SEC has broad discretion in interpreting and implementing such laws as it deems appropriate.

“You can actually get a very accurate median estimate by sampling as little as one-half of 1 percent of a company’s workforce, even for massive multi-national companies,” Ohlrogge said.

Ohlrogge submitted several comment letters to the SEC, building his case for statistical sampling. He analyzed legal precedent to argue that, despite there being no specific mention of statistical sampling in Dodd-Frank, the SEC would be justified in using sampling. Then, relying on his engineering skills, he crafted the sampling technique companies could use to estimate median income.

Well done.  You can bet, though, that the corporations wouldn’t have found it so burdensome to figure out if they thought they could profit from it (vs. the pay ratio promising to expose the ludicrousness of their executives’ pay).

(3) TPP:  Just two items to pass on about the TPP:

(4) Rana Plaza Victory:  To end on an up note:  we have been covering the efforts to get clothing retailers whose goods were being made in the Rana Plaza factory that collapsed in Bangladesh on April 24, 2013, in John Miller’s articles After Horror, Apologetics, and After Horror, Change? (his columns in our last two Sept/Oct annual labor issues). Finally, change has arrived, as announced by the International Labor Rights Forum:

The International Labor Rights Forum is thrilled to announce that two years of campaigning, with over one million people participating, has succeeded in securing $30 million in compensation for the victims of the Rana Plaza building collapse – the deadliest disaster in the history of the global garment industry.

“This campaign victory would not have been possible without the hard work of workers’ rights groups and labor unions on the ground in Bangladesh, and activism from a wide array of allies around the world who held more than a hundred store actions and demonstrations at corporate headquarters,” said Judy Gearhart, Executive Director of the International Labor Rights Forum.

Maybe we’re overcoming the dynamic Barry Deutsch documented in his cartoon for our March/April 2014 issue:


That’s it for now.