'One Market Under God' Chapter One: The Illuminati

[erislover]

Well, after a bit of self prodding I picked up the book, One Market Under God by Thomas Frank, and I cannot yet say whether I thank Gadarene for this suggestion or not ;)

The contents of the first chapter will serve to outline this OP. I have not yet read passed the first chapter.

The first chapter sets the stage for what Frank is describing as a massive shift in appearance of Big Business. Big Business is explained to have bested the other two Bigs (Labor and Government) in some contest of the gods, fought in the terms of populism (identification with the masses). BB (and for you 1984 fans the choice of abbreviation is delierate) is said to have ushered in a wave of support for itself by essentially overturning popular expression and symbolizing the market as the ultimate expression of democracy.

Big Business was able to achieve this because of shoddy regulation practices and the decline of the Labor movement, says Frank. He conveniently fails to mention why Labor lost its power and why Government regulation failed to serve its purpose, but nevertheless BB was there, lurking in the backround, eager to reclaim the Holy Grail of popular support that it graduallly let slip in the early 20th century, and which it completely lost after the Great Depression.

The travesty is, we are told, that the expression of Regulation and Labor is essentially a "throwback" to the stodgy 50's, and who wants that? The new CEO rides a skateboard. The old corporations are thinking new, and thinking you. The economics of Hayek and other free-marketeers are telling us that if we aren't wealthy it is because we haven't innovated, and those innovators like Gates are where they are by running circles around Old Money and corporate Fat Cats.

[Meanwhile, these innovators really are the corporate fat cats, and the gap between the rich and the poor grows]

So far, the chapter eerily reminds me of The Illuminatus! Trilogy, not in that I feel it is presenting fiction as fact, but rather that there is some vast conspiracy lurking out in the open, and if we could just see passed the fnords in IBM's commercial we'd all trancend our ignorance. To quote:
Hayek may be dear to the hearts of a certian breed of corporate autocrat, the sort of guy who finds it easier to get through the day by imagining himself a target of a vast conspiracy, marked for death by the eggheads simply for daring to fill out forms or produce boxes at such a fantastic rate.
When you look into the abyss, Tom.

To be fair to Frank, he does present many detractors opinions fairly, and apart from the general context of the book without sarcasm (yet). But this does not stop me from making the following observation about liberalism and its attempt to cry out.

It is always the target of a vast right-wing/ Christian/ libertarian conspiracy. These people are lying to us ('us', the common men and women). They've ingrainined it into our language. There are fnords on the television and doublethink in the workplace. The market fails, people!-we need regulation, we need stability, we need control over the areas of the market that do not accurately reflect our interests.

Meanwhile, the marketeers that Frank will get on to damning are expressing their support of the market by its ability to realize the desire of just about anyone, by its ability to reward hard work and punish failure, by its ability to adjust quickly and efficiently to whatever comes down the pike, to raise all ships in the ocean of the capitalist economy.

My comments on my "expression" of liberalism have been said a few times here on the board. I have come to accept (or rather, shall we say 'agree') that the market can fail in certain key areas. I in no way feel that it fails in as many ways as proposed liberal regulation would have me believe, but as ever I am willing to listen.

My comments on my expression of the marketeers is that they are simplistic in their notions of what a market can actually realize. I don't think a liberal government would give us niche political markets like fetishists, whereas the market itself can actually cater to much smaller subsets of interest. But that alone does not mean that the market really is the true expression of the population.

All that notwithstanding, the book seems to touch a Randian nerve in me, as do many posts on this board that seem to ring true to it's (the book's) words. The liberal movement seeks to undermine the Illuminati (that is, corporate america) while laughing at corporate america's cries that there is some liberal conspiracy against them.

Truth be told, people, it is a big fucking conspiracy on all sides, and I am not laughing about it, and I don't think that any of the Big Three (Labor, Business, and Government) can do squat about it because they are all struggling to fight each other. They ar like divorcees and we are the children caught in the middle. The Labor movment wants to stagnate growth so workers don't have to reeducate themselves and stay competetive, while Government seeks to force competition by battling Business tries to consolodate economic power. Each side has its own little Ayn Rand on their shoulder, espousing some tired ideology that should rise above all others like the WD-40 of political, social, and economic life. Each side promises everything and delivers...

Well, each side delivers things, too. The Labor movement did give us the 40 hour work week in a way, and they did succeed in toppling the combined powers of Government (who stoped breaking strikes) and Business (who didn't care about their employees). The Labor movement also made benefits possible to more people than I could imagine, even those who aren't unionized. The Government has secured the borders, 9/11 notwithstanding, and has provided an infrastructure capable of supporting a large population in a large land mass. This is no small feat, as comparable land-mass countries have not done the same. And Business has given us (or popularized) tools which have made huge economic success possible. No, I don't make a huge salary, and no, I do not live a life of leisure, but god damn it even people on welfare have televisions and cars.

But I'm no moderate. I'm exceedingly libertarian on social matters, and pretty libertarian on economic ones (though I am mostly identified with 'conservatives' because I fight regulation :rolleyes: ).

Are there things to fix? Sure, but trying to point out conspiracies in the woodwork isn't going to accomplish much other than aid the ongoing struggle of the Big Three, each of which have their problems. Excessive labor movements slow growth and devaluate the dollar, excessive regulation hampers innovation and puts power in the hands of lobbyists, and excessive growth leads to civil unrest. None of these things are mysteries.

The real tragedy, IMO, are people who write these books, catering to the angst in different social groups without mentioning the fact that their solutions are no better, and to some are actually worse. The illusion presented by liberal and conservative ideologies is more dangerous than corporate fascism (Business), Oceania (Government), or Marxism (extreme Labor). And listening to even some very recent posts in the media threads disheartens me even more. The tired rhetoric of the vast (insert group here) conspiracy isn't false, but it isn't doing anything than shifting power form one conspiracy to the next.

But perhaps I am really just a victim of the fnords Frank mentions.

[sailor]

You can sell a book, start a cult, run for office, just bsed on the premise "100 reasons why X is bad" without once addressing the equally true "but the alternatives are even worse". I can give you 100 reasons why democracy is bad and they are all true. Of course, I can give you even more resons why the alternatives are even worse.

These days it is fashionable to say big business has too much power. I happen to think this is not as bad as it seems at first. I happen to think dividing power is a very good thing. The government is divided into three equal branches and it works fine. I can give you 100 reasons why this is bad but the fact is countries where the government is not divided like that and it holds monolithic power are countries where I would not want to live. Now, power is not only government power, it is also other kinds of power (economic, information, etc) which the government does not and should not hold and I want these powers as divided as possible. Countries where a few people hold all power are shitholes. I want the checks and balances. I want strong economic interests to check the power of the politicians and I want the government to check the power of the corporations. I do not want any of them to be absolutely above the others. If the government had absolute power to regulate business without limits, that would be a disaster as government people know little about business. Any country where the government runs the business world is a disaster. I think it is a *very* good thing that economic power is free to push for its own interests.

Power: the more divided, the better. We have the government divided into the three traditional branches. The economic power of corporations all competing so they have common interests but also competing interests.

The power of the media and information in general which also serves to keep the government and the business world in line.

The power of NGOs which are becoming more and more important in the world.

And the power of each of us as individuals to vote for the politician we like, buy the product we like, volunteer for the NGO we like....

In summary: Big business has a lot of power: yes, but I do not consider that a bad thing in the least. It may have some bad things but the alternatives are even worse.

Now you have big business trying to get away with stuff and other groups putting limits on that. If the governemnt and big business were pretty much one and the same, who would put limits on either?

[Measure for Measure]

I haven't read the book in question, so I can't comment upon that.

But dang, eris' ranting/writing has gotten way better.

Firstly, like flowbark, he's discovered italics. Always good for a chuckle, though I'm not sure why.

Now, it wasn't perfect, but the paragraph that started with "Truth be told, people, it is a big fucking conspiracy on all sides" and ended with "Each side has its own little Ayn Rand on their shoulder, espousing some tired ideology that should rise above all others like the WD-40 of political, social, and economic life. Each side promises everything and delivers... " had some nice turns of phrase.
The real tragedy, IMO, are people who write these books, catering to the angst in different social groups without mentioning the fact that their solutions are no better, and to some are actually worse. The illusion presented by liberal and conservative ideologies is more dangerous than corporate fascism (Business), Oceania (Government), or Marxism (extreme Labor). Nice 1984 allusion. I liked "Oceania" especially.

Oh, and the concept was sound as well: ideologues and politicians are in the vision biz.

To that, I would add that journalists and writers are in the Narrative Business. And that good narrative is not always good analysis.

Finally, I would say that many (not all) of the underlying issues are empirical ones, that is ones where it matters whether the world is actually fashioned in one way or the other. Bias in interest or perceptions nothwithstanding.

[mswas]

The problem is not with people writing books with a particular agenda. These books are necessary, it is even necessary that a single book have an agenda or else it wouldn't be coherent. One book cannot espouse ALL sides. The problem is with people who unlike you, lack the critical thinking skills necessary to make a cognitive decision as to which parts of the book they are reading make sense and which parts are ludicrous.

I off and on read a book in the same vein as the one to which you refer. It's a book of essays, which is how I accomplish the on and on thing and still have a coherent idea of what I'm reading. Anyhow, it's called Commodify your Dissent, and while it has an agenda, that agenda is on point, however the point is very trite, and it does say things, that are true, about the way corporate culture incorporates rebellion and uses it as a marketing tool, it also makes it in a very trite sarcastic manner, and to me at least seems as though it is stating the obvious.

With these types of books, while everything they are saying may or may not be true, you have to look at it as part of a larger picture, one that is not contained completely in that book. It's as Sailor said, they can make 100 statements that are all true but not mention what type of effect the alternative might have. Lately I am trying to read books from many sides of the equation in my interests. (Well at least articles) Right now I am reading Edward Said's Orientalism to get a perspective on the European colonial perspective from an alternative viewpoint, in kind of an attempt to figure out how modern foreign policy was shaped, especially with regard to the middle east. However this book will no more serve as a bible than reading Kissinger.

The problem is not with the narrow viewpoint presented in literature, it's with the narrow viewpoint being received when someone reads a book that fits their perceptions so that they can feel justified in the way that they think.

Erek

[Mandelstam]

erislover, I don't have the time right now to reply to your post. And I imagine Gadarene will do better anyway. However,
I thought I'd post this article-length excerpt from Thomas Frank's book so that others who don't know One Market Under God could look it over and offer an informed reply.

The article is quite full--gives you a very good sense of where Frank is coming from.

BTW, I think it's pretty brilliant (http://www.thenation.com/doc.mhtml?i=20001030&s=frank)

[Mandelstam]

sailor, I do have time to briefly reply to your post. You suggest that there should be a balance of power: big business/big government. I think what Frank is after is big people. I'm for that as well.

The mere fact that you don't even see "the government" as something that is yours as a citizen is proof in itself of how deeply dysfunctional our democracy has become.

In any case, I think you might find Frank more interesting that erislover's post would lead you to believe.

[Measure for Measure]

Mandelstam Thanks for the link. Here's my review, FWIW:

The article was devoid of any sort of explicit policy discussion. Hey, that's ok.

It cited a number of catch-phrases such as, "Washington Consensus", and "Golden Straightjacket", without discussing their conceptual underpinnings or justifications.1 That's ok too.

I think Frank's theme is contained below:
From Deadheads to Nobel-laureate economists, from paleoconservatives to New Democrats, American leaders in the nineties came to believe that markets were a popular system, a far more democratic form of organization than (democratically elected) governments. This is the central premise of what I call "market populism": that in addition to being mediums of exchange, markets are mediums of consent. Readers of Wired magazine, as well as the WSJ will be familiar with the market populism concept.

Frank doesn't bother to draw any distinctions that might distinguish the valid aspects of this concept (surely markets have some role in matching production to consumer preferences) from the dubious ones. That might involve a careful evaluation of the extent to which consumer preferences are autonomous or easily manipulated. Woops, too tricky. Hey, I'm good with that.Markets were serving all tastes, markets were humiliating the pretentious, markets were permitting good art to triumph over bad, markets were overthrowing the man, markets were extinguishing discrimination, markets were making everyone rich. I suppose there was some sloppy thinking during the 1990s which tended to oversell the free market. But this isn't exactly an original observation. And let's face it, Frank's characterization of the cultural Zeitgeist was pretty rough. Maybe I'm missing something (other than Frank's admittedly colorful language.) Perhaps the book is better. Or perhaps I'm just not a Zeitgeist kind of guy.
__________________________________

1The Washington Consensus refers to the developmental policy advocated in DC (and, BTW, elsewhere) for third world countries. Noting that import substitution, military dictatorship and extensive regulation had not been particularly successful in Latin America, the Consensus emerged that 3rd world countries should emulate the Asian tigers (South Korea, Taiwan, Singapore, Malaysia, Thailand, etc.) who had successfully made the transition to between lower income and middle or upper income. The Golden Straightjacket refers to the propensity of the international bond and currency markets to punish economically unsustainable policies. Just in case it wasn't clear from the article.

[Mandelstam]

Thanks flowbark for that reply.

I should perhaps have noted that the article-length excerpt was published as a cover story in an issue of The Nation a couple of years ago. Most Nation readers know all about the "Washington Consensus" as that term (and its ilk) are used constantly to explain why there is so little understanding of or debate about the current course of globalization. When Frank excerpted for The Nation, in other words, he would have assumed that his readers would be successful graduates of "courses" in the Excesses of Multinational Corporate Power 101 and 102. ;).

Bear in mind too that Frank is a cultural commentator--not an economist, historian, or sociologist. As such his aim isn't either to parse policy, or to collect new forms of empirical data, but to interpret existing policy/data in an original and incisive way. Frank says he's coined the idea of "market populism" and I'm not sure, flow, whether you're suggesting that the term has been in use in Wired, or simply that what it refers to is there on display without any self-conscious naming. (As to the WSJ, in that case you presumably mean that the paper disseminates "market populism"--for I can't imagine you believe that the Journal is in the business of showing readers how they're being suckered in by the powerful allure of market mythologies.)

In either case, I think Frank deserves credit for an original analysis since he's been writing about these issues since the late 80s and some of the people who write for Wired would be exactly the sorts to actually read The Baffler (Frank's publication), etc.

As to the kind of analytic tools Frank brings to bear on the subject of culture--there are, of course, major precedents. Frank practices a kind of analysis inspired by the works of Roland Barthes Mythologies, Pierre Bourdieu (works too numerous to mention), and British cultural studies writers such as Dick Hebdige, whose stellar cultural analysis of punk (Subculture, The Meaning of Style, 1979) is a personal favorite of mine.

Said's Orientalism--sitting on mswas's night table as we speak ;)--can be put in this grouping, though it has been deservedly credited for taking this kind of analysis into a new "postcolonial" direction.

In a general sense all of these books show us how cultures--in this case, modern Western, liberal-democratic cultures--generate certain myths that help ordinary folks to buy into the status quo even though the status quo wouldn't, without these myths, give them a great deal of purchase (literally or figuratively!).

The goal implicit in these analyses, therefore, is a population that is more conscious, informed, and, therefore, active in understanding and pursuing the popular interest. In other words, a more active citizenship and, as a result, a more truly democratic society.

[Mandelstam]

Oh dear, I actually skipped your definition of "Washington Consensus," flowbark, assuming that it would be neutral and reliable. Alas, I must dissent!

The Asian tigers didn't in the least follow the Washington consensus; rather they followed a model of economic nationalism that Japan pursued way back when. It's only recently, since the bubble economy in Asia (for various complicated reasons) required a late 90s IMF bail-out that the "golden straightjacket" has, to a degree, been imposed on the tigers.

For particularly glaring examples of how badly this policy works see: Russia and Argentina. There is actually no example of a success story predicated on Washington consensus models; some like to cite India even though India--despite IMF badgering and some recent neo-liberal policies--features a highly complicated blend of non-consensus and pro-consensus elements. China is certainly not a "WC" adherent, though that may change now.

The important thing to bear in mind is that when third-world countries are asked to accept the Washington consensus in exchange for IMF loans, they're being asked to accept conditions that the United states and Europe would never accept for themselves. Some would reply that this is because the US and Europe are already industrialized--but the biggest lie (or implication) of all is that first-wave industrialization depended on Washington-consensus-like policies.

For examples of how "first-world" industrial nations could not and did not industrialize under the free-trade orthodoxies of the Washington consensus, see any of the following: the history of British industrialization c. 1780-1870, the history of German industrialization c. 1870 on, the history of French industrialization c. 1870 on... All of these relied upon aggressive mercantilist and/or nationalist policies--not on some "straightjacket" of free-trade and/or laissez-faire.

[sailor]

sailor, You suggest that there should be a balance of power: big business/big government. I think what Frank is after is big people. I'm for that as well. Mandelstam, I am most definitely *not* for big government. I am for the smallest government which we can live with. Regarding business, I am for big competition which should be a "checks and balances" of sorts in this area. As for "big people" well, I like them petite but there's no accounting for taste is there? ;) The mere fact that you don't even see "the government" as something that is yours as a citizen is proof in itself of how deeply dysfunctional our democracy has become. Au contraire mon ami, I definitely participate through the democratic government but I also participate through my work in a company, through NGOs which I support, through my purchases as a consumer, etc. God save us all if the only choices we had was the politicians we could vote for.

[Mandelstam]

sailor: "God save us all if the only choices we had was the politicians we could vote for."

Precisely. But what I'm suggesting is that democratic "government" shouldn't and needn't be reducible to the (increasingly unexercised) act of voting for "politicians."

I don't think you will understand this without reading Frank but, in effect, your views are the product of the malaise Frank is trying to describe. By your own characterization, you are a market populist. You see markets as the one place where you can exercise choice, and you see "government" as primarily an obstacle to your participation in hte latter.

The one important difference between you and the Frank prototype is your participation in NGOs which Frank would undoubtedly see as an important form of non-market activity.

FTR--I'm an amie not an ami but please to be on amiable terms with you nonetheless. ;)

[erislover]

Originally posted by Mandelstam
[to sailor]
By your own characterization, you are a market populist. You see markets as the one place where you can exercise choice, and you see "government" as primarily an obstacle to your participation in hte latter.
Exaccery! Let's face it, not all regulation aimed at improving the market actually helps consumers. As I tried to say eloquently (but I fear I've failed) a bureacracy like a monopolistic government cannot cater to niche politics, whereas the market actually can cater to niche markets. Witness fetish botiques, crazy-ass pornography, pickle-lovers, bakers, etc. If I am a baking fanatic there are many areas where I have my own store to buy from, dedicated to my needs!

No WAY a government can accomplish this. Though the idea of a power monopoly does differ from an economic one, some premises must carry over, and one of these is an inability to innovate. So yeah, we need the government to undermine negative market tendencies, but I think it is a laughing matter (Nelson: ha-ha) to say that Democracy will solve our political and social needs. It doesn't, and it can't.

And a point which a certain poster often mentions (christ, I can't remember who it was, and I am sorry for this because I was very glad they said it) is that business can devote full-time resources to lobbying the government, while we need to get on with our lives. Sure, we can vote ever X years on certain political matters, but lobbyists get to influence political decisions as they happen.

The closest thing the average mope has to this is supporting (or not) a market trend as it is brought out. But even here one is washed away with the tide, unless you happen to live in a high-population area (or at least one which can feasibly support niche markets).

Woe is you if you want to visit a strip club in many towns. Not that the economic demand isn't there, but hey, all "they" (nay-sayers) hav to do is vote up a few zoning regulations and you can forget about seeing the girl next door shaking her stuff, when clearly both you and her want it to happen.

Democracy as politics has a say in absolute regulation of existence (to whatever extent that regulation encompasses, it obviously doesn't need to be 1984-esque), but the market (operating smoothly from limited government interference) doesn't care about that. In Congress, a democrat and a republican need to work together to achieve results. In the market, competing businesses can work right next door to each other.

Frank seems to want me to believe (and I am midway through chapter two right now) that market-as-democracy is a farce, and I don't think that is well-founded. Clearly it has many democratic elements to it. Hell, by many standards our form of government as democracy is a farce. Not all my choices are accurately, or even inaccurately, represented or representable (consider the case where I don't support any politician running and I don't vote: this has the same impact as the guy who doesn't care about voting at all; now, are those two expressions really equivalent? Our democracy would have me believe it is).

Unions, too, are rather democratic in their own way. Hell, any thing which allows people to choose can be considered demcratic; any thing which fails to reflect all choices can be said to democratically fail. Sort of a trivial conclusion when one comes right down to it.

Any dominant structure is not perfect, and it needs to have other structures which will either prop it up or control it in some way. The question is one of getting the whole house of cards to stand. And if businesses want to tell me that I have more choices today because of them, am I supposed to think they are lying to me when my own senses tell me it is so?

[Kimstu]

erl: ...a bureacracy like a monopolistic government cannot cater to niche politics, whereas the market actually can cater to niche markets. Witness fetish botiques, crazy-ass pornography, pickle-lovers, bakers, etc. If I am a baking fanatic there are many areas where I have my own store to buy from, dedicated to my needs!

Swell. I think we're all agreed that markets are irreplaceable when it comes to ministering to this kind of consumer preference. The "command economies" of the Communist companies just couldn't compete in that regard. No argument there.

I think Frank's point, though, is that the aim of "market populism"---which kind of seems to be working in your case---is to persuade you that markets are the best way to satisfy all of a citizen's needs, not just his/her consumer preferences. After a long enough barrage of "ain't markets wonderful!" rhetoric, we tend to lose sight of the simple fact that markets are not capable of catering to our needs except where they can make a profit.

You want green ketchup, custom fetishry, gourmet pickles, "crazy-ass pornography", baking tins shaped like the Statue of Liberty? The market will supply them, and all sorts of other luxuries and necessities, in profuse abundance and generally at competitive prices---thank heavens for markets!

You want low-cost high-quality education for special needs kids? Unskilled jobs that don't expose workers to lots of health hazards and pay them enough to make a reasonably secure living and save for retirement? Improved environmental and public health protection? Well-staffed, well-maintained public lands for wilderness and recreation without exorbitant user fees? Excellent public libraries? Research on vaccines and treatments for diseases that mostly affect poor people? Do you see private businesses elbowing each other out of the way to offer us increased choices in these or any of a host of similar areas?

No, for the simple reason that these are not money-making commodities. There are lots of things that people want and need that it is simply not profitable for markets to try to provide. That's a fact of economic life, and there's nothing wrong with it, and it's not intended as a criticism of markets.

The problem arises when businesses try to encourage us to overlook this fact: "hey, if the private sector is so good at providing us with cheddar-and-jalapeno pickles, it must be good at providing us with job safety and public health and reliable investments too! Deregulate everything! All power to the market!" Uh, nope. I'm not knocking the advantages of having more choices in many consumer goods and services because of the market, and I really don't think Thomas Frank is either. What I think he's criticizing is the insinuation that therefore markets must be better at everything.

Hell, any thing which allows people to choose can be considered demcratic; any thing which fails to reflect all choices can be said to democratically fail.

Right. And by that standard, the private sector is extraordinarily democratic in the area of a certain range of consumer choices, as you point out. It is extremely undemocratic when it comes to things like determining company policies on waste disposal, employee work schedules and job benefits, job security, non-discriminatory practices, and so on.

Frank's claim, AFAICT, is not that the market isn't democratic in its own limited sphere of consumer choices. Rather, he is complaining that "market populism" tries to persuade us that all our needs are or can be satisfied democratically by markets, because gee, markets are just so gosh-darn democratic and cool and lovable by their very nature, is that great or what? I think Frank has a point when he notes that such claims are pure marketing bullshit and are not a sound basis for economic policy.

Sure, continue to be happy about the fact that markets make it possible for you to get lots of stuff you want. Just don't lose sight of the fact that markets will not lift a finger to provide you with anything, no matter how desperately you want or need it, that doesn't make a profit for the provider. If we could figure out a way to make all human desires and benefits financially profitable, then the "market populist" claim that total marketization equals total democratization would be true. But as things are? No way.

[erislover]

Well, who am I to comment on people being swayed by powerful rhetoric? It wasn't too long ago that I was an aynrandlover.

But I think Frank's point would have a greater impact if he were a bit more explicit. Of course, I started this thread with me not being very deep into the book, and it is a long book so there would be far too much to comment on after reading the whole thing, so perhaps I am still judging his observations harshly. But some stray comments lead me to think otherwise, like the one I posted in the OP.

Here is another that leaves a bad taste in my mouth(All original emphasis):
When the Wall Street Journal editorialized in September 1000 in favor of industry-specific relaxations of immigration law which would allow certain high-tech companies "greater freedom... to import skilled immigrants" and keep costs low, the paper chose to pound the measure's opponents—people already working in theose high-tech fields—by accusing them of the foul class snobbery toward themselves: "It was always a slur on American workers that their employability depended on closing our markets to foreigners."
That the context of this paragraph is supposed to be an example of the kind of double-think we are swallowing in market populism is noteworthy. I think it is a slur on American workers that we must curb importing labor (or make it difficult to do so) in order to provide them jobs. In what crazy-ass isolationist world do we live when such an action does not bespeak of a direct comment on talent?

And here we find that what is really failing isn't business for hiring the cheapest talent available, or the government for making work visas and similar papers/legitimate means of existence more difficult to obtain, but the failing of our beloved unions which are dropping the ball and not snatching up more industries. Or do we blame the workers for not spontaneously forming their own unions?

Nah, let's blame the businesses for not thinking like good isolationists.
You want low-cost high-quality education for special needs kids? Unskilled jobs that don't expose workers to lots of health hazards and pay them enough to make a reasonably secure living and save for retirement? Improved environmental and public health protection? Well-staffed, well-maintained public lands for wilderness and recreation without exorbitant user fees? Excellent public libraries? Research on vaccines and treatments for diseases that mostly affect poor people? Do you see private businesses elbowing each other out of the way to offer us increased choices in these or any of a host of similar areas?

No, for the simple reason that these are not money-making commodities.
True 'dat, and I am not one to disagree here. I think there is a place for the government in the economy. I would even support anti-trust legislation if it were worded more clearly.

Moreover, I can easily admit that there are many areas that the market cannot address at all, nevermind poorly, and something should probably fill that gap. I can think of nothing better than a democratic government making laws about such behavior/areas/whatever.
It is extremely undemocratic when it comes to things like determining company policies on waste disposal, employee work schedules and job benefits, job security, non-discriminatory practices, and so on.
Is that necessarily true? Here is where the concept of democracy-as-market is tricky as hell. Would it be democratic if we voted for waste-disposal regulation? Would it be democratic if concerned citizens demanded specific waste-disposal procedures from a company lest they stop providing it with business? Would it be democratic if the waste disposal personell went on strike until waste was disposed of better?

There's three democratic solutions for you, each acting within a specific sphere of influence, all conceivably achieving the same effect. Why would any one be better than another?

Political solution to waste:
This is great if the correct method is actually achieved, but due to the nuances of political corruption, more likely is it that corporate lobbying will affect the laws more than the voters' interests would, since the voters' interests are only polled by spontaneous outpouring (emails, letters, phone calls to congresspersons) and the occaisional poll or vote. But if the voters' interests are represented, then there is no problem with this method.

One plus to this method is that a minority subset of the population, if it doesn't encounter enough dissent, can get the law written in their image. Well, it is a plus if you agree with the opinion. It is a minus if you don't know such a law is about to be passed so you may form an opinion on it.
Market solution to waste:
I don't have much to say here. I think this is the way most situations should be handled because it is possibly quick, and should there prove to be a problem with the "regulation" it can be adjusted quickly without lawsuits, lawyers, or more regulation (or amendments to said regulation).
Labor solution to waste:
This, too, is perfect, and acts as the ultimate lobbyist group in every industry in the world. If it were to work there would be no problem with it in my mind.


I think that, generally, the market or labor solution should be acted on first, and regulation should be a last-ditch effort. If the concern is that not enough people would care to act in order to overturn such events, then any political action taken isn't democratic almost by definition, no?

I think I beat this baby seal quite a bit, but it is my own little crusade. In the America that exists in my mind, anything that the government can accomplish (over the market, not in place of market-failure areas) could be accomplished to the same or better effect by action from labor or the market itself (or, hopefully, both). If we don't care enough to act on such things, then passing a law on it isn't any more democratic, and I think it is an abuse of the word to say it is.

Exactly what areas are still subject to government regulation are a matter of discussion, of course. Maybe that's what this debate should focus on, because I fear we are all rambling on about vague generalities a bit. :) But as I am one who loves rambling posts, I ain't complaining.

[Kimstu]

erl: I think it is a slur on American workers that we must curb importing labor (or make it difficult to do so) in order to provide them jobs. In what crazy-ass isolationist world do we live when such an action does not bespeak of a direct comment on talent?

"Direct comment on talent"? Isn't it rather a direct comment on the law of supply and demand? If immigration policies allow employers readily to import large numbers of foreign workers who will do the job for less money, it is in no way a slur on American workers to point out that the competition will tend to diminish their salaries and the number of jobs available to them. Nobody's saying that foreigners will necessarily do the job better---that would be a slur on American capabilities---just that foreigners tend to do the job for less money, which makes them more attractive to employers.

How could it be otherwise? Are you imagining that it would be more realistic for American workers to say instead "Hell, let them loosen immigration restrictions, I'm confident that my talents and performance are so superior that my employer will prefer to keep me on rather than hire a guy from Bangalore at one-third of my salary and benefits package!"? For crepes' sake, if that were the case, why would employers be seeking to loosen immigration restrictions at all? Mind you, I tend to believe that immigration is in general a good thing, but I'm not naive enough to think that people who resent the extra competition it provides are just being too negative about their own abilities.

And here we find that what is really failing isn't business for hiring the cheapest talent available, or the government for making work visas and similar papers/legitimate means of existence more difficult to obtain, but the failing of our beloved unions which are dropping the ball and not snatching up more industries. Or do we blame the workers for not spontaneously forming their own unions?

Hmm, you don't think this could have anything to do with employers exerting pressure (http://www.sciam.com/2001/0801issue/0801numbers.html) (sometimes in illegal ways) on workers to prevent them from forming or joining unions, or on government agencies to prevent them from protecting labor rights? I'm happy to hear anybody supporting workers' right to collective action, and I agree that unions should do more on the organizing front, but let's not kid ourselves that employers aren't doing all they can to make it as difficult as possible for them. That's just the dictate of the bottom line: non-union labor, like foreign labor, comes cheaper, so it's in employers' interests to have as much of it available as possible.


Would it be democratic if we voted for waste-disposal regulation? Would it be democratic if concerned citizens demanded specific waste-disposal procedures from a company lest they stop providing it with business? Would it be democratic if the waste disposal personell went on strike until waste was disposed of better? ...

I think that, generally, the market or labor solution should be acted on first, and regulation should be a last-ditch effort. If the concern is that not enough people would care to act in order to overturn such events, then any political action taken isn't democratic almost by definition, no?

I think you kind of missed my point. I'm not claiming that it isn't possible to address such problems via consumer boycotts or employee strikes (although it's definitely not easy to create one that's genuinely effective, and it usually involves a lot of extra-market influences like feelings of public duty or solidarity; the basic market incentives are all in the direction of buying stuff and getting paid, which is why strikes and boycotts, when people voluntarily give up those advantages, are comparatively rare.) I'm just saying that the standard market approach to such issues---i.e., the folks who run the company make the decisions---is profoundly undemocratic. That's not always a bad thing; not everything can be done democratically. It's just important to bear it in mind when we start to get swept away on the market-populist rhetoric that markets are naturally democratic.

I think that, generally, the market or labor solution should be acted on first, and regulation should be a last-ditch effort. If the concern is that not enough people would care to act in order to overturn such events, then any political action taken isn't democratic almost by definition, no?

That's kind of a peculiar argument. Why would we expect that consumers or workers taking their own uncompensated time and risking their own advantages should be the first solution to abuses by business, rather than the people we elect and pay to defend our interests?

In the America that exists in my mind, anything that the government can accomplish (over the market, not in place of market-failure areas) could be accomplished to the same or better effect by action from labor or the market itself (or, hopefully, both). If we don't care enough to act on such things, then passing a law on it isn't any more democratic, and I think it is an abuse of the word to say it is.

Except that, as you pointed out before (I think it may be jshore who frequently mentions this), consumers and workers don't have anything like the resources that businesses routinely invest in such issues. Insinuating that groups of disparate individuals who can't put together from scratch an organized movement sufficiently powerful to withstand PR/economic/legal pressure from companies that can well afford to pressure them simply "don't care enough to act"---now that's a slur on Americans. The resources we do have to act on such issues are mostly concentrated in government legislative and regulatory agencies, and that's where we should be using them, IMHO.

[Measure for Measure]

MandelstamLet me clarify.

1) I'm suggesting that Wired magazine and the editorial page of the WSJ exhibit the sort of, "rah-rah aren't markets superior?" attitude that Frank labels "market populism" and Soros labels "market fundamentalism". (Although there are distinctions between the 2 concepts; Soros' term applies more to the WSJ, while Frank's notion is more oriented towards Wired.)

2) I'm suggesting that identifying this phenomenon isn't exactly difficult. Furthermore, while "Market populism" has a nice ring to it, coining a workable phrase doesn't quite overwhelm me with feelings of admiration.The goal implicit in these analyses, therefore, is a population that is more conscious, informed, and, therefore, active in understanding and pursuing the popular interest. Ah, no. I argue that a conscious informed population would be more adept at policy analysis than at the sort of superficial lit-crit analysis that Frank provides. And it is superficial. Essentially, it identifies a thread within a number of differing analyses without bothering to address the substantive arguments within those analyses. But, hey, Frank is a cultural critic: that's his job.

No problemo.1

The Asian tigers didn't in the least follow the Washington consensus; rather they followed a model of economic nationalism that Japan pursued way back when. It's only recently, since the bubble economy in Asia (for various complicated reasons) required a late 90s IMF bail-out that the "golden straightjacket" has, to a degree, been imposed on the tigers. 3) Maybe we're on different pages. Please characterize the components of Japan's policy. Then characterize the specific policy prescriptions of the so-called Washington consensus. Then show their dramatic differences.

Here's my definition of the components of the Washington Consensus:
Fiscal discipline.
A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure.
Tax reform (to lower marginal rates and broaden the tax base).
Interest rate liberalization.
A competitive exchange rate.
Trade liberalization.
Liberalization of FDI inflows.
Privatization.
Deregulation (in the sense of abolishing barriers to entry and exit).
Secure property rights
Source: http://www.iie.com/papers/williamson0799.htm

I would say that Japan, South Korea and Taiwan embody this set of characteristics better than Argentina (competitive exchange rate? fiscal discipline?) or Russia (fiscal discipline? Secure property rights?)

As an aside, I would emphasis the second, the last and the first ones on the list, roughly in that order. Furthermore, I would note that there are important differences between the "Washington Consensus" and the sort of Market Fundamentalism espoused on the editorial pages of the WSJ. (See #2, #5, and even #9 at times).

4) Also, Washington doesn't impose the "Golden Straightjacket"; international capital markets impose it. (eg France in the early days of the Mitterand regime). Although if you get your information from cultural critics, it's easy for me to see how this rather important distinction (between the golden straightjacket and the Washington consensus) can be blurred. After all, the two terms share the same Zeitgeist. (This is insight?)

The important thing to bear in mind is that when third-world countries are asked to accept the Washington consensus in exchange for IMF loans, they're being asked to accept conditions that the United States and Europe would never accept for themselves. 5) No, the important thing to remember is that the IMF never imposes its plans on anybody. Now, I'm not convinced that the IMF always does the most competent job, but it's important to remember that they are only called in when unsustainable economic policies become manifest. Those blaming the IMF often resemble the fool who blames the fireman for the fire.2 Also note that actually US policy does rather resemble 10-point list above, at least relative to Argentina in the 1970s.

1In contrast, the term market fundamentalism can be useful starting point. It naturally leads to a discussion of the strengths (adept processing of preferences) and weaknesses (inequality, failure when certain goods such as pollution are not priced) of the market system.
2Ok, so that's a clumsy metaphor. Hey, we all can't be writers.

[Measure for Measure]

Those who have read the link I provided will recognize that I am using the term, "Washington Consensus" in the way that its original inventor (J. Williamson, 1989) used it. Since then, it has become synonymous with "market fundamentalism" in common usage.

Now then. My underlying point is that Frank isn't very good with distinctions. There was a consensus among economists during the late 1980s and mid 1990s regarding developmental policy, and that consensus did not jive all that well with the tenants of market fundamentalism. Except in the most superficial sense. Furthermore, I would argue that the IMF / World Bank never espoused market fundamentalism, although at times the WSJ has.

I'm not saying that Frank disagrees with me on this point. I'm saying that he never addresses the underlying issue(s). And that those with hopes for enhanced human welfare are not well-served by such muddling.

Eris muses: Exactly what areas are still subject to government regulation are a matter of discussion, of course. Maybe that's what this debate should focus on, because I fear we are all rambling on about vague generalities a bit. The appropriate role for government: 'Nother thread, guy.

[Measure for Measure]

Tenets of market fundamentalism. But maybe the original version isn't that bad. ;)

[Mandelstam]

flowbark, I enjoyed skimming Williamson's article and it's good to know that man who claims to have coined the term "Washington consensus" wants to distinguish between it and the popular sense in which it used--that is, as a synonym for neo-liberal economic policies.

Here's Williamson himself btw:

"Let me take first the popular, or populist, interpretation of the Washington Consensus as meaning market fundamentalism or neo-liberalism: laissez-faire, Reganomics, let's bash the state, the markets will resolve everything… It will presumably come as no surprise that I would not subscribe to the view that such policies would be good for poverty reduction. We know that poverty reduction demands efforts to build the human capital of the poor, but on the populist interpretation the Washington Consensus signally fails to address that issue. ..."

This is an interesting point, and were we debating whether the World Bank is or isn't invested in neo-liberalism tout court its relevance would be substantial.

As an indictment of Frank, however, it's pretty marginal since Frank isn't writing an article on the Washington consensus (he uses the term only once I believe), and he isn't discussing globalization. Rather, he's analyzing the condition of culture and citizenship in the US, and arguing that democratic participation has been coopted by "market populism."

Frank's "market populism"--as analysis of what many Americans believe about markets, and George Soros's "market fundamentalism," a neo-liberal policy agenda, don't therefore, refer to the same thing. (I like Soros, btw, so I'm not at all criticizing him or Williamson's invocation of his term.) I'm simply pointing out that since Frank's focus is US culture, not the global economy, the distinction isn't relevant.)

"Maybe we're on different pages. Please characterize the components of Japan's policy. Then characterize the specific policy prescriptions of the so-called Washington consensus. Then show their dramatic differences."

There are numerous differences even today--though if you look again at my post what I said was that the Asian "tigers" emulated the Japanese "miracle" way back when, with the key words, as far as Japan goes, being "way back when."

It is common knowledge that free trade orthodoxies were not part of the policies that underwrote the economic "miracle" of Japan or the tigers. In fact, many (including Paul Krugman. who is pro-free trade) blame the tigers' eventual failures on their differences from the Western liberal model.

BTW--I don't champion Asian-style economic nationalism; I simply note that it was effective in building an industrial economy as no neo-liberal model has ever been. (Neo-liberalism can work for an advanced industrial economy; but it doesn't work for getting an industrial economy off the ground; hence all the criticism directed at IMF policies.)

However, all of this is a HUGE detour from Frank.

"Also, Washington doesn't impose the "Golden Straightjacket"; international capital markets impose it."

I did not say that Washington--as in the US government--"imposed" the straightjacket. Where did you read that? I understand the provenance of the term, flowbark. However, if you care to start a thread with a globalization theme we can debate the extent to which governments--the US'S and Europe's--make it possible for financial markets to exert "discipline" as such.

"Although if you get your information from cultural critics, it's easy for me to see how this rather important distinction (between the golden straightjacket and the Washington consensus) can be blurred."

Actually, I get my cultural information from cultural critics; I get my economic information from a variety of sources including but not limited to books, economists' writings, and The New York Times business section. I think if you re-read you'll discover that the only blurring that occurred on this topic was imputed by you.
As Williamson's own article points out, it's common to use "Washington consensus" as a synonym for neo-liberal economic policy. So attempting to discredit Frank with this particular charge--when his article isn't about this or any other trade or fiscal policy--is a bit absurd.

As for the "golden straightjacket"--perhaps you know that Thomas Friedman is himself a journalist with no formal background in economics whatever. He is what The Times itself would probably be happy to admit is a cultural critic; as well as the author of the (particularly dim-witted) The Lexus and the Olive Tree. I guess you might say he's a market populist. ;)

"My underlying point is that Frank isn't very good with distinctions. There was a consensus among economists during the late 1980s and mid 1990s regarding developmental policy, and that consensus did not jive all that well with the tenants of market fundamentalism."

I believe you mean "tenets," though I rather like the idea of "market fundamentalism" as a chichi condo in the TriBeCa area ;).

Once again: where exactly did you get the impression that Frank's article was about "developmental policy"? I'm beginning to think you read a different link...

More to Frank's actual focus:

"I argue that a conscious informed population would be more adept at policy analysis than at the sort of superficial lit-crit analysis that Frank provides."

I agree that citizens should familiarize themselves with policy analysis. But what makes you think that Frank expects people to read his article and abjure policy analysis? As he doesn't purport to be a policy analyst, as he merely purports to be a cultural critic, one might as well criticize him for any number of things that he doesn't do that would be important for a well-informed citizenry. A well-informed citizenry should be fully abreast of US political history and Frank doesn't do that. Does that mean he's superficial?

Sorry flowbark, reading isn't a zero sum game. And given how this thread is going, I'd say that Frank's thoughts on "market populism" are controversial to say the least. Now that you'd explained it, you're idea that Frank isn't worth reading because he notices something that's evident from reading the Wall Street Journal is a bit odd.

"Essentially, it identifies a thread within a number of differing analyses without bothering to address the substantive arguments within those
analyses. But, hey, Frank is a cultural critic: that's his job."

Sounds like you have a bit of an axe to grind against cultural critics. I'd say there's a role for people who tie together different kinds of analyses with which their readers are already familiar, offering an interpretation.

But to each his own.

Btw, here is the quotation from Frank himself--early on in the article. This and your seeming unfamiliarity with Frank's actual argument makes me wonder if you actually read the article or just the first couple of paragraphs.

"The opposition was ceasing to oppose, but the market was now safe, its supposedly endless array of choice substituting for the lack of choice on the ballot. Various names were applied to this state of affairs. In international circles the grand agreement was called the "Washington Consensus"; economics writer Daniel Yergin called it the "market consensus"; New York Times columnist Thomas Friedman coined the phrase golden straitjacket" to describe the absence of political options. While once "people thought" there were ways to order human affairs other than through the free market, Friedman insisted, those choices now no longer existed. "I don't think there will be an alternative ideology this time around," he wrote in August 1998. "There are none."

Note that Frank's definition of "golden straightjacket" is quite different from flowbark's.

[Mandelstam]

Addendum

1. When I said that neo-liberalism can work for an advanced industrial economy, I ought to have said, for some peple in an advanced industrial economy. (It's probably no secret that I don't agree with neo-liberalism.)

2. Apologies flowbark if I appeared not have noticed that you corrected your own typo with tenet/tenant. I just had to get that line about the condo in ;)

[erislover]

Isn't it rather a direct comment on the law of supply and demand?Yeah. Business demands cheaper workers, and workers demand less frugal businesses. Whether we close our doors to immigration or not this is the case.

It is a question of what work is worth. One could say, "My work is worth this much." Another could say, "To him, my work is worth this much." A third could say, "The value of my work changes depending on who I am competing in the job market with."

Which man is most correct to you, Kimstu? To me: the third man is always correct, whether he is his own boss and is self-employed, selling services; or if he is a construction worker seeking a job in the outskirts of a major city....but I'm not naive enough to think that people who resent the extra competition it provides are just being too negative about their own abilities.Doesn't it? The concern is that their salary demand is too high for their ability with respect to other able workers. Whether they are immigrants or not they still must live in the same geographic region, pay the same bills, and so on, do they not?I'm happy to hear anybody supporting workers' right to collective action, and I agree that unions should do more on the organizing front, but let's not kid ourselves that employers aren't doing all they can to make it as difficult as possible for them.Well, we can count on the government to break strikes or make them illegal. Thank god we may always fall back on democracy when the market fails! (not meant to be sarcastic at you, btw)Why would we expect that consumers or workers taking their own uncompensated time and risking their own advantages should be the first solution to abuses by business, rather than the people we elect and pay to defend our interests?Why would we expect that voters would keep up with the politicians that they are supposed to trust? Why doesn't that strike you as any more strange? Somewhere, a babysitter is not being babysitted.The resources we do have to act on such issues are mostly concentrated in government legislative and regulatory agencies, and that's where we should be using them, IMHO.But the only way "we" can "use" them there is to be politically active! So let me ask, if we must be active to get results, then why create a babysitter to babysit when we can simply eliminate the middle-man?

[Measure for Measure]

I don't know where to begin. I really glean very little insight from Frank's article. Let's start at the end, I guess.
1)
Mandy saysBtw, here is the quotation from Frank himself--early on in the article. This and your seeming unfamiliarity with Frank's actual argument makes me wonder if you actually read the article or just the first couple of paragraphs.

..."The opposition was ceasing to oppose, but the market was now safe, its supposedly endless array of choice substituting for the lack of choice on the ballot. Various names were applied to this state of affairs... In international circles the grand agreement was called the "Washington Consensus"; economics writer Daniel Yergin called it the "market consensus"; New York Times columnist Thomas Friedman coined the phrase golden straitjacket" to describe the absence of political options.
Note that Frank's definition of "golden straightjacket" is quite different from flowbark's. Duly noted. This is part of my problem: I maintain that my characterization of Friedman's ideas is more accurate. And that furthermore Frank takes a set of subtlety different ideas and points out how they all fit within an "market populist" rubric. They do. It's just that pretending that these distinctions don't exist, heck not even acknowledging that they might exist, does the reader a disservice. But, hey, Frank isn't a policy analyst, I guess. Nonetheless, I assert that he does pretend to have a working grasp of the terminology he uses, a pretense that I find inaccurate.

Mandy said way up there It's only recently, since the bubble economy in Asia (for various complicated reasons) required a late 90s IMF bail-out that the "golden straightjacket" has, to a degree, been imposed on the tigers. 2) This is where I got the idea that your definition of a golden straightjacket differed from Friedman's. The golden straightjacket affects any government who operates in the world economy, so it isn't a late 1990s phenomenon, even for Asia.

3) Now let's jump to the end of Frank's article:
Market populism can seem quite absurd at times. We are, after all, living through one of the least populist economic eras in the past hundred years. The "New Economy" has exalted the rich and forgotten about the rest with a decisiveness that we haven't seen since the twenties. Its greatest achievement--the booming stock market of recent years--has been based in no small part on companies' enhanced abilities to keep wages low even while CEO compensation soars to record levels. Well, Frank is right about CEO compensation. However, real wages picked up in the mid 1990s just as the stock market really got cooking. Frank doesn't feel a need to check this easily-verified fact though, since he operates in the realm of ideology rather than empirical reality. (It sounds right that wage growth went down as the stock market went up. It just doesn't happen to be factual.)

4) I think the bit about the Washington Consensus is kind of off-topic: I now see I was responding to Mandelstam and not Frank. Bums me out. Took me forever to write that. Grumble, grumble.
Mandy claimsIt is common knowledge that free trade orthodoxies were not part of the policies that underwrote the economic "miracle" of Japan or the tigers. 4) Actually, it's a highly contentious issue among economists. IIRC, the tigers had tariffs of around 20%. Which is pretty high, until you consider that Africa and Latin America had tariffs closer to 40%. So, relative to Latin America, the Asian tigers did follow a policy of trade liberalization. What's less clear (at this level of analysis) is what would have happened if the tigers had lower tariffs.

To the extent that Frank assumes this sort of common knowledge, rather than actually reporting on it, he does his readers a disservice.

5) Still, I get the sense I'm talking around the central point. (If only I could figure out what that is. Let me make some stabs.)

6) I really don't have an ax to grind with cultural critics; my problem is with sloppy thinking or evading precision. Let's see. I like Elvis Mitchell, Gina Arnold and Lexington. I don't really care for Maureen Dowd. FWIW

Mandy:And given how this thread is going, I'd say that Frank's thoughts on "market populism" are controversial to say the least. 7) I perceive the controversy revolving around things that Frank's choir assumes. I don't see too much debate regarding whether the WSJ (or Wired) believes what Frank says they believe, for example. Again, it's sorta obvious. Put in another way, eris and I have our disagreements about the proper scope of government. But Frank's analysis isn't about the proper role of government, it's how Americans perceive that (and how they perceive the role of markets).

8) And I might argue that American's views are more nuanced then Frank lets on. But that would involve reading Frank, rather than skimming him. (Guilty as charged. :) )

[Measure for Measure]

As Eris says, at the top of the screen The real tragedy, IMO, are people who write these books, catering to the angst in different social groups without mentioning the fact that their solutions are no better, and to some are actually worse. Or without really examining either problem or solution at all...

[jshore]

Originally posted by erislover
When the Wall Street Journal editorialized in September 1000...

Well, I am too tired from setting folks straight on missile defense and global warming ;) to wade into this debate in a substantive manner so I'll leave the substantive part in the capable hands of Kimstu and Mandlestam....But I just had to ask: Did it ever occur to anyone else here that if The Wall Street Journal editorial page really was caught in a 1000 year time warp as the above typo suggests then that would explain an awful awful lot!?!

[jshore]

Okay, so I am a lying SOB. After reading over this thread in more detail, I can't resist jumping in a little bit here.

Originally posted by erislover
Isn't it rather a direct comment on the law of supply and demand?Yeah. Business demands cheaper workers, and workers demand less frugal businesses. Whether we close our doors to immigration or not this is the case.

And the point is that business is going to continue to push for those policies that allow for cheaper workers and give workers less opportunity to band together collectively and workers are going to continue to push for policies that give them more bargaining power with businesses so that they can get higher salaries, etc.

So, at the end of the day, you are left with policy questions to settle and these policy questions will affect, in your terms, "the value of my work" that the hypothetical person calculates.

In practice, "leaving the question to the market" seems to be usually used as a shorthand form of "let's settle these policy manners in ways that are largely in favor of business" in this tug-of-war.


So let me ask, if we must be active to get results, then why create a babysitter to babysit when we can simply eliminate the middle-man?

I think it is unrealistic to believe that everybody can keep up on every issue. The idea of government in principle is that it is another collective means by which we are able to find out the relevant information, decide on what should be done, and make sure it is being done by sort of delegating the work out. Now, it is true that once we have a representative government then it does not eliminate our need for vigilance as our representatives will still need to be watched and held accountable. However, I still prefer this to having to, say, go and investigate every meat-packing factory myself in my copious free time.

Originally posted by flowbark
Well, Frank is right about CEO compensation. However, real wages picked up in the mid 1990s just as the stock market really got cooking. Frank doesn't feel a need to check this easily-verified fact though, since he operates in the realm of ideology rather than empirical reality. (It sounds right that wage growth went down as the stock market went up. It just doesn't happen to be factual.)


Well, to me it sounds like a statement that the gains of these past years were shared very unequally....Perhaps real wages didn't keep up with gains in worker productivity or that they didn't nearly keep up with rises in CEO compensation or market capitalization and thus that the gains were very unevenly distributed. Since I've done enough research recently, I'll leave it to others to see how, say, rises in real wages compared with gains in productivity but my WAG is that they didn't keep up, especially when you consider the entire boom and not just the last few years of it when those further down the scale did manage to catch up somewhat. (My impression, BTW, is that these gains were the first to be reversed in the latest downturn.)

[By the way, I read Frank for his insightfulness on the "big picture of what is going on", kind of to provide interpretation rather than give me detailed facts. If you want precise scientific statements about the correlation between stock market gains and real wage gains as a function of time, you aren't really turning to the right person.]

[erislover]

1000?!? How the hell did that slip in? Sheesh.
The idea of government in principle is that it is another collective means by which we are able to find out the relevant information, decide on what should be done, and make sure it is being done by sort of delegating the work out. Now, it is true that once we have a representative government then it does not eliminate our need for vigilance as our representatives will still need to be watched and held accountable. However, I still prefer this to having to, say, go and investigate every meat-packing factory myself in my copious free time.
Well, in principle the market performs much better than it actually seems to given the way it is treated.

And the issue here is that you don't have to keep vigilant on the meat packing factory. That's what the employees are for. See, you've got a built-in babysitter ready to go in every single industry in the entire world. Now, maybe if unions weren't so busy trying to demand guaranteed wage increases regardless of work improvement and actually got involved in what the businesses were doing we might see some real empowerment of the "common" man.

Now, we ask the question: what gives the businesses so much power over their employees. Is it the employees, or the government? And if it is the government, why do you expect that the employees could fight the government if they couldn't fight the business?

Something isn't adding up over there as I am reading this.

[Measure for Measure]

Can't....keep...away.... Must...make...another .....post.
Originally posted by jshore
Well, to me it sounds like a statement that the gains of these past years were shared very unequally....Perhaps real wages didn't keep up with gains in worker productivity or... Yeah, perhaps. Or perhaps top executives got rich due to crooked accounting (distributed stock-options not counted on the income statement). Or maybe the booming stock market had something to do with changing risk preferences, risk perceptions, etc. The only thing we know is that it had nothing to do with declines in median real wages, since that occurred from approximately 1975-1995 and reversed after that. The point is that all of this is lost in Frank's misleading rhetoric.
[By the way, I read Frank for his insightfulness on the "big picture of what is going on", kind of to provide interpretation rather than give me detailed facts. Ok, I've only read one article by the guy, so any assertions I make about Frank should be taken with a heft of salt. If you have a link to an article of his whose underlying point is less obvious, let me know.

Still, if Frank can't get the basic facts right, what makes you think that his perception of the "big picture" is accurate? More likely, I would think that he creates an attractive and reassuring big picture, as does, oh, Rush L for example. Both excel at beating that tribal drum: the one that provides "us" with a warm self-satisfied feeling largely by defining (and critiquing) "them".1 But I would say that both lack a certain, ah, substance.

At the moment, I'm (tentatively) putting Frank in the bin with the large collection of assorted ideologues whom I don't take very seriously. But, hey, it's a living.

1Not that I have a problem with drum-beating. What I have trouble with is when the writer does little else.

[Measure for Measure]

Originally posted by erislover
And the issue here is that you don't have to keep vigilant on the meat packing factory. That's what the employees are for. See, you've got a built-in babysitter ready to go in every single industry in the entire world. Now, maybe if unions weren't so busy trying to demand guaranteed wage increases regardless of work improvement and actually got involved in what the businesses were doing we might see some real empowerment of the "common" man.
Um, eris, go back to your 1984 analogy. Recall that although, Fascville, Oceania and Marxyland all had wartime economies (there was always some enemy), who that enemy was would shift around.

For example, steel employees and the steel industry find common cause in dicking both the consumer (and auto workers) by appealing to Oceania for higher tariffs. Similarly, your typical meat packer doesn't necessarily want the public to know whether the meat they sell is rotton: he might lose his job. On this issue, he and the bosses are in agreement.

Change the circumstance, and labor can form other coalitions. (eg., accept innovation and international competition and we'll give you unemployment insurance and other safety nets.) Likewise for business, environmental advocates, etc.

[jshore]

Originally posted by flowbark
Still, if Frank can't get the basic facts right, what makes you think that his perception of the "big picture" is accurate?

But, my point is a bit stronger than that. I think your claim that he isn't getting the basic facts right is made on the erroneous basis of trying to read an extremely specific claim into a general statement that he makes. There's nothing in his statement that says that there is a direct negative correlation in time on a year-to-year basis between the stock market and real wages.

And, in fact, I don't see why we should expect the correlation to be quite so direct....There very well could be sort of lags here. Surely once the economy gets really really hot as it did in the late 90s then the high demand for labor is bound to help wages catch up some! [And, of course, I'm sure he is not claiming that every time we have a downturn and stocks fall then at the same time real wages go up...that would be silly.] His general point, as I would interpret it, is that over the longer term (the 90s or the 80s and 90s or the last 25 years, it's not even clear what period he is thinking of), part of what has fueled the stock market has been the ability to keep the increase in real wages below that of productivity gains so that labor has effectively gotten cheaper.

Now, it may well be that there is no reasonable sense in which we could say that Frank's general claim is correct. However, it seems to me that you are far from proving that...You have only shown that you can abstract from it one specific claim that is incorrect.

[Mandelstam]

flowbark: In brief. I understand that you're interested in a complex definition of terms such as "golden straightjacket" and "Washington consensus." Frank, who uses these terms once, and only by way of illustrating the dominance of a wider "market populism," doesn't provide these nuances. Fair enough.

"But, hey, Frank isn't a policy analyst, I guess. Nonetheless, I assert that he does pretend to have a working grasp of the terminology he uses, a pretense that I find inaccurate."

And I assert that there's no way to tell from reading the 3-page article you read how much complexity Frank would acknowledge on these matters or not. For the umpteenth time, he's not discussing them, and, more important, none of the differences you perceive within the terminology--interesting though they are, and relevant to any number of threads--is relevant to Frank's thesis on "market populism" in US culture. For example, your point is that Frank doesn't make clear that fiscal discipline is imposed on lenders by international capital markets themselves (debatable, but irrelevant to this thread, is the degree to which "capital markets" would be able to do this if powerful nation-states didn't make these conditions possible and sustainable). You are troubled by the fact Frank that when Frank uses the term (once), he doesn't make that clear. Do you think if he did it would change his views about "market populism" in US culture in the least?

"Well, Frank is right about CEO compensation. However, real wages picked up in the mid 1990s just as the stock market really got cooking. "

Well, I see that jshore has entered the debate on precisely these grounds. I will have to do some checking round to get actual cites on this for you: but, as I recall, real wages for the working classes and all but the highest level of the middle classes have been dropping since the '80s. IIRC there was a very short exception to that--in which the wages of the working poor increased modestly in real terms--c. 1997-9, I believe. Then came the recession so the latest figures are unlikely to reflect more gains and may well reflect decline. In either case, the temporary reversal of a decades-long decline does not a relative increase make. And when you're looking at what was going on with the richest 5%--it's pretty dramatic. The middle class is shrinking; the poor are poorer than they were in the 1960s, the proportion of working poor has increased, and--the good news!--there is a growing number of millionaires and billionaires.

[re Asian tigers - common knowledge that their rise was nationalist vs. free-trade - flowbark says there's room for debate there] "To the extent that Frank assumes this sort of common knowledge..."

And what extent is that? Frank doesn't mention the Asian tigers even once. Honestly flowbark, it's really pointless to debate about something you skimmed so quickly! For all we know Frank has read widely on the subject of Asian industrialization; he may also be up-to-date on quantum physics; both topics are equally irrelevant to the posted article.

"Frank doesn't feel a need to check this easily-verified fact [re real wages] though, since he operates in the realm of ideology rather than empirical reality."

Well, sorry to say, I haven't seen much empirical reality from you either flowbark. You skimmed Frank fast enough to offer a somewhat irrelevant response to his main argument, you alleged a debate as to Asian industrialization that has nothing to do with Frank's article and, in general. you've adduced no empirical arguments whatsoever. As I say above, I believe your assumptions as to real wages are faulty. Sorry, flow, but the truth is that your participation in this thread, thus far, is 100% ideology.

"Put in another way, eris and I have our disagreements about the proper scope of government. But Frank's analysis isn't about the proper role of government, it's how Americans perceive that (and how they perceive the role of markets)."

:)

"And I might argue that American's views are more nuanced then Frank lets on. But that would involve reading Frank, rather than skimming him. (Guilty as charged. :) "

Well thanks for the honesty there. And I don't think that Frank means to imply that the population of the US is 100% composed of market populist clones. Still, I'm ready to concede that Frank focuses on the embrace of market populism, not on dissent to it, or nuances within it.

Relevant, perhaps, (though the events in question occurred well after the publication of Frank's book) is the Enron thread in which part of what's been discussed is the outburst of anti-market populism in response to Enron's collapse.

[Mandelstam]

Some empirical info (www.commondreams.org/headlines/090400-01.htm) on real wages to supercede my hazy recollections...

Excerpt:

"Perhaps most dramatic in that respect was the 62.7 percent rise in the real wage of the median corporate executive officer (CEO) between 1998 and 1999 alone. The typical CEO earned 107 times than the typical worker last year, according to EPI - almost double the difference of a decade ago.

Real incomes of low-income families grew at a 1.9 percent annual rate from 1995 to 1999; those of middle-income families grew at a 2.3 percent rate; while those at the top grew by 3.2 percent.

Over a longer time span, from 1979 to 1999, however, real hourly wages for high-wage earners increased 17.6 percent, while wages for low-wage earners fell during the same period by 9.3 percent, according to the report which noted that those in the middle saw real wages stagnate. "

As to the relation between productivity gains and wage gains, mentioned by jshore, I'll keep on searching when I have the time...

[Mandelstam]

Oops! I left out one of the most interesting bits.

"What gains have been made in family income were largely due to a sharp increase in family working hours, according to the report. The average middle-class, married-couple family, which increased its income by 9.2 percent from 1989 to 1998, worked 182 hours more per year over that period, roughly equivalent to a full month of work."

[jshore]

By the way, part of what influenced my thinking on what Frank might be referring to in terms of wage vs. productivity gains is an exchange between Andrew Biggs and Frank that appeared in my lastest Harper's.

Biggs, whose title is "social security analyst" at the Cato Institute and was on the President's social security commission, wrote a letter in response to an article by Frank on social security privatization in Harper's a few months ago. Frank then has a response to Biggs' letter. In particular, Biggs attacks Frank for "a move of almost stunning deceptiveness" in noting that a change of 1% in the assumed wage growth would keep SS solvent until around 2060; Biggs notes that this "slight change" amounts to a doubling in the assumed wage growth from 1 to 2%. Here is Frank's response:


On the matter of wage-growth statistics, I stand by what I wrote. The figures I used weren't an invention; as I indicated in the essay, the were the wage-growth levels the United States actually experienced in the period between World War II and 1973. Is it stunningly deceptive to argue that wage growth can still hit 2% today? One newly released federal report tells us we can expect labor-productivity growth (a figure that, as I pointed out, has historically been equal to wage growth) of 2.1% a year through 2012. Its title: The Economic Report of the President. Maybe Mr. Biggs should send an indignant letter to his fellow privatizers in the White House.
[/quote]

[jshore]

This illustrates the striking disparity between the growth of labor productivity and real wages (especially mean wages): http://www.epinet.org/webfeatures/snapshots/archive/2000/041200/snapshots041200.html. These figures are now a couple years out of date; it would be interesting to see it extended through the end of 2001. But note how real mean wages didn't reach back up to the 1989 baseline until 1998 by which time labor-productivity gains were in the neighborhood of 18%!!!

[jshore]

Please replace the word "mean" by "median" in the two places it appears in my previous post!

[jshore]

[Okay, so I should have compressed this into less than 4 posts ... I'll try to be a little slower on the "submit" button next time!]

The bottom section of this page discusses the productivity -- compensation gap over a longer period of time and also mentions the interpretation of this gap in terms of higher stock prices and profits: http://www.leftbusinessobserver.com/Stats_earns.html. (I don't know if this interpretation has been criticized from a more centrist or Right perspective.)

[Gadarene]

What a fantastic thread. I'm proud to have played some small part in its inception, and disappointed that I'm too busy to contribute further. erl, thanks for starting the discussion; Kimstu, Mandelstam, and jshore, you're doing a hell of a job articulating my position. :)

[erislover]

The logic of business is coercion, monopoly, and the destruction of the weak, no "choice" or "service" or universal affluence.
This is on page 87 of the book. I think it is very important to the discussion at hand, which is more or less the idea of how we think about economics, and it certainly demonstrates that Frank comes at the subject with a huge chip on his shoulder. The "logic" of business is no more fascist than the "logic" of redistribution is socialism. There is absolutely no reason why a business couldn't be philanthropic and redistributive on a medium or even high scale.

flowbark, I suppose I can envision scenarios where it is in a meat-packer's interest to sell rotten meat. I can also envision scenarios where it is in the food inspector's interest to pass off violations.

A meat packer, or other worker in general, has no serious interest in promoting the highest quality of good apart from the worker's desire to do his job right. The business may clearly have a vested interest in cutting corners, and from that could come coercion. In that my comment was rather short-sighted, but my intent wasn't to say that meat packing industry should be self-regulated per se, but rather that the workers, as part of a union or other less formal organization, have the ability to ensure that the job is done right.

Such an act could only bode well for the public perception of unions themselves. AFAIK, public perception of unions is not exactly a good thing. Union workers are often envisioned to be lazy slackers who cut corners and demand overtime pay to do the work they should have done already. How much of this is true is more or less besides the point (though I think it is partially true in quite a few industries, and I at least know it is true in one specific industry at one specific plant); the point is that labor unions serve as a check on employers. Regulation serves as a check on employers. I think that putting two and two together here is something that should be considered. Proper labor pressure to accomplish something constructive like this should be rather effective in many cases. But to accomplish this it would need to allow for the removal of union employees which aren't performing up to par, whereas the current situation is more of a "Oh, I just saw Joe by the water cooler talking to Billy," and Billy says, "Yeah, I just talked to him, he said he was heading over to... [etc]" while, in fact, Joe didn't show up that morning and his buddies clocked him in anyway.

I think the labor movement lost its power because it gave it up, flat out. It demanded everything and didn't really provide much in return.

The problem of wealth inequality can be viewed in a similar manner: the businesses demand much but give little in return. In this case, I think the flaws of labor enabled businesses to get away with whatever they are getting away with. And if we cannot expect the unions to take interest in their own jobs, then what good is regulation going to serve? Is the threat of legal action so much more worrying to a CEO than the threat of a strike? Perhaps it is, it just doesn't seem like it to me.

For example, steel employees and the steel industry find common cause in dicking both the consumer (and auto workers) by appealing to Oceania for higher tariffs.
But this is exactly not what I am saying. Tariffs are a government thing. And the government interference is exactly my problem.

I think unions have dropped the ball, watched it deflate, and kicked it into the sewer. They became corrupt some time ago, and many corrupt branches still remain (unless the "right-wing" media is lying to me, too, which I supopse I must accept as fact within the context of the thread).

In fact, it seems almost obvious that unions based on self-interest motivation (job security, higher wages, better benefits, more vacation time, etc etc etc) must fall prey to the same things that businesses do. Are we to say, then, that we must rely on the good will of a small subset of men (the government) to perform the babysitting? But why couldn't the government fall prey to the same thing as they scuffle to get reelected? Isn't this a common critique of politicians?

I just want to be clear here: I am not any longer an overwhelming supporter of the free market or of businesses or anything, but rather that the flaws inherent in a for-profit economy will spread to any and every sector that deals with it. Corruption, lying, and scheming will poke their way into every venue.

When businesses go bad we blame the CEOs, when governments go bad we blame the voters :confused: It seems in both cases the fault is with the people who interact with this specific power set, or the fault is with the specific politicians as much as it is the fault of the CEOs. Just because we live in a democracy does not mean a priori that our politicians are serving our interests. That being the case, why would we rush to consolidate economic power in the hands of the political power? Especially when we take it for granted that "most folks" aren't taking an active interest in the big picture?

Seems like a tragic mistake to me, and a serious logical flaw.

[Kimstu]

Some interesting points, erl, but I think you may be missing an important issue in the debate whether business regulation should be partly the domain of government or left entirely to workers and consumers. Namely, government does what consumers and workers can't do, which is to make regulatory laws that are applicable to businesses in general. Unless you want to give that power to workers and consumers directly (how?), you are setting up a situation where every single infraction by every single employer/producer has to be countered with a separately initiated strike and/or boycott, organized and maintained by people who (as noted earlier) are mostly not compensated for it and are often risking a great deal in order to do it.

You personally may feel that government is completely impotent in regulating businesses; however, businesses themselves, judging by their complaints about bureaucratic interference, don't seem to think so. There is certainly room for improvement in citizen oversight of government, but I don't think we should kid ourselves that we the public will find it easier to monitor many thousands of individual businesses than to oversee several hundred representatives and a couple dozen regulatory agencies. Your suggestion of eliminating the contemptuously-named "babysitters" simply means that we citizens would have much less power than we do even now.

[Frank:] The logic of business is coercion, monopoly, and the destruction of the weak, no "choice" or "service" or universal affluence.

This is on page 87 of the book. I think it is very important to the discussion at hand, which is more or less the idea of how we think about economics, and it certainly demonstrates that Frank comes at the subject with a huge chip on his shoulder. The "logic" of business is no more fascist than the "logic" of redistribution is socialism. There is absolutely no reason why a business couldn't be philanthropic and redistributive on a medium or even high scale.

I agree that the statement is pretty one-sided, and that there are often plenty of logical market-based reasons for businesses to provide things like "choice" or "service": if providing consumer choice or good service will make a profit, that's a powerful incentive for a company to provide it. But if the company can make more money with worse service and anti-competitive practices, the market incentive shifts to that strategy instead. Individual businesspeople and companies may still prefer to put the customers' or workers' needs first in such cases, but if they choose to do so, then they are making decisions based on extra-market values. The sole market incentive is the maximization of profit.

Recall that Frank is taking a deliberately combative stance to provide what he sees as a needed corrective to massive corporate PR efforts to portray the market as naturally democratic, intrinsically beneficial, innately a force for good. It isn't; it is a completely socially-amoral engine for maximizing profits, and if "coercion, monopoly, and the destruction of the weak" will maximize profits, that's the strategy the market will adopt. I agree that we need to bear in mind that the market incentive sometimes encourages useful corporate activities rather than destructive ones. But I think Frank's point is that we're in no danger of forgetting that aspect, because corporate PR is blaring it into our ears 24/7; what we need to remember is that markets in general are perfectly willing to reward destructive behavior too.

I think the labor movement lost its power because it gave it up, flat out. It demanded everything and didn't really provide much in return.

I don't dispute that greed, corruption, and indifference to quality have been big problems in a number of unions, and I don't think there's anything wrong with pointing that out. However, I think you're overlooking other important factors in the decline of American unions, such as deregulatory efforts beginning in the 1980's and increased capital mobility that shifted the balance of power further in employers' favor. Businesses have always been in favor of the destruction and decline of unions---not because they evilly relish "coercion and the destruction of the weak", but simply on the basis of the bottom line---and they have never ceased to push for it. Perhaps they could never have succeeded so well without labor's own failures and betrayals, but that doesn't mean they haven't always been trying.

Is the threat of legal action so much more worrying to a CEO than the threat of a strike? Perhaps it is, it just doesn't seem like it to me.

Well, considering that only about 10% of private-sector workers are currently unionized, while all businesses are (at least technically) subject to the law, legal actions are likely to affect more businesses than strikes will. Also, US labor law and regulatory oversight are notoriously weak, as noted in the article I linked to above; there are very few serious legal penalties that employers actually suffer for illegitimately retaliating against workers who attempt to organize or attempt to strike. So it's quite rare that collective worker action actually gets far enough along to pose a real threat to an employer's profitability. Perhaps if we had a stronger "social wage" system including income supports, basic services, continuing education, retraining, etc., workers would be less completely dependent on their existing jobs and would be less economically vulnerable in negotiating with employers.

I think unions have dropped the ball, watched it deflate, and kicked it into the sewer. They became corrupt some time ago, and many corrupt branches still remain (unless the "right-wing" media is lying to me, too, which I supopse I must accept as fact within the context of the thread).

Oh, we won't demand that much of your liberal orthodoxy. ;) But I do wonder, how much of what you think about unions is based on following their current activity, and how much is just part of a general cultural impression that is, naturally, partly mediated by business? For example, do you know who John J. Sweeney is? What do you think of his recent decisions? Do you know what the acronyms HERE and SEIU stand for, and what those organizations have been up to lately? In short, do you have actual evidence that would cause you to trust unions less than businesses, or is it mostly just a hazy impression?

In fact, it seems almost obvious that unions based on self-interest motivation (job security, higher wages, better benefits, more vacation time, etc etc etc) must fall prey to the same things that businesses do.

True 'dat.

Are we to say, then, that we must rely on the good will of a small subset of men (the government) to perform the babysitting? But why couldn't the government fall prey to the same thing as they scuffle to get reelected? Isn't this a common critique of politicians? [...] Corruption, lying, and scheming will poke their way into every venue.

Egg-zackly. That's precisely why, IMHO, it's so important to maintain a reasonable balance of power between the different economic sectors: business, government, and citizen organizations such as unions and activist groups. Since they're all scheming for different things, if they maintain reasonably equal relationships then they can police one another reasonably effectively. Also, I think there's a lot to be said for various kinds of formalized power-sharing, though I think the current level of coziness between business and government is going too far. But I think it makes sense to include union leaders and citizen representatives on company boards of directors, and to have business input into local government, and so forth. That way, the broad groups can still check and balance one another but individuals can be less adversarial and gain a "stakeholder" sense.

When businesses go bad we blame the CEOs, when governments go bad we blame the voters.

You think?? I have never noticed people being too shy to criticize the specific politicians who were directly responsible for the decisions they don't like.

Just because we live in a democracy does not mean a priori that our politicians are serving our interests.

Yup.

That being the case, why would we rush to consolidate economic power in the hands of the political power? Especially when we take it for granted that "most folks" aren't taking an active interest in the big picture?

I don't think anyone's suggesting that economic power should be consolidated in the state; that would be to regress to a "command economy" of the sort that failed so badly under communism, and as I said earlier in this thread, I doubt anybody's seriously arguing for that. What many of us---and, I think, Frank in particular---are deploring is that instead, the reverse seems to be happening: we're consolidating too much political power in the hands of market interests, under the carefully-fostered delusion that markets are intrinsically, inevitably democratic and progressive and beneficial, and so we're crippling the other sectors of society that should be exercising a restraining influence.

[erislover]

Well, Kimstu, a perfectly reasonable post that I have little to say in response. A few things to touch on, though:

But I think Frank's point is that we're in no danger of forgetting that aspect, because corporate PR is blaring it into our ears 24/7; what we need to remember is that markets in general are perfectly willing to reward destructive behavior too.
I think this is an awesome point to make, but I don't feel that coming from him yet. It all feels like warmongering propaganda, the exact thing he is accusing business of. Again, I am not going to throw the book down or anything, and I don't think the guy is an idiot, but I feel that the most important thing he could say is exactly what you said. Anything that can support higher profits in the marketplace will be attempted, good and bad have no meaning in the market.

My opinions on unions were meant to illustrate Frank's point more than detract it. I only know a few union laborers. But they have all told me stories about union behavior (mainly because I ask them all sorts of nosy questions). But my opinions on unions aren't founded from anything authoritative; if anything, my exposition was meant to serve as an example of what propaganda can achieve.

I almost never hear people talking unions up. And no union worker that I've met has been particularly proud of their union, either, when asked specifically about it. But even if all union employees I meet said that they were happy to pay their dues it wouldn't change public opinion about them. It isn't enough to simply be satisfied with your current position if one expects to make a change, you know?

But I do wonder, how much of what you think about unions is based on following their current activity, and how much is just part of a general cultural impression that is, naturally, partly mediated by business?
Apart form what I said above, my impression is just that: an impression.

[Measure for Measure]

jshore says Now, it may well be that there is no reasonable sense in which we could say that Frank's general claim is correct. However, it seems to me that you are far from proving that...You have only shown that you can abstract from it one specific claim that is incorrect. To be honest, Frank is ambiguous here. I'm not hoping for the "no reasonable sense" standard. Rather, I'm saying that Frank is misleading, driven by ideology and indifferent to the facts. (I may be wrong, this is after all only one article. Furthermore, Frank would hardly be alone in this regard. Which is why I can't get too bent out of shape about the guy.)
Let's look at Frank's quote again:According to Frank, the "New Economy's"...greatest achievement--the booming stock market of recent years--has been based in no small part on companies' enhanced abilities to keep wages low even while CEO compensation soars to record levels. Leaving aside whether the stock market was actually the New Economy's greatest achievement, I think it's clear that Frank was talking about the "recent years" during the 1990s. Unless you want to trace the New Economy back to the Reagan years. I trust Heritage has made such an argument.

I almost grabbed that quote at random: it's from the last paragraph in the article, so one would think he might not want to end on a misleading note. Yet from the epi link, we see that real wages bottomed out in 1996 and then started growing during the years of the "New Economy's greatest achievement (sic)".

But jshore's LBO link was really great. "If there are real real wage gains, then it's about damn time." Precisely. And my eyeballing of their productivity chart suggests that compensation and productivity were moving in lockstep during the late 1990s -- for the first time in about 20 years. To me _that_ would be the greatest accomplishment of the New Economy. But right-wingers like Frank, jshore and Mandelstam may disagree with me. I can respect that. ;) (d&r: please don't hurt me.)

Ok, so I'm being obtuse. The point is that there were some rather large changes in the economy, that Frank really should have made his business to know about. As far as I can tell, Frank is more concerned with ideology than facts. But (dammit) I think quality control is important. Kuddos to the left business observer.

Let me restate. I would appreciate learning what exactly Frank has to offer. I'd like to see a paragraph of his with some empirical content that is neither obvious nor misleading. Surely, I'm setting the bar pretty low. Even better would be a link to another article of his which is superior.

[Measure for Measure]

Mandelstam: Well, sorry to say, I haven't seen much empirical reality from you either flowbark. You skimmed Frank fast enough to offer a somewhat irrelevant response to his main argument, you alleged a debate as to Asian industrialization that has nothing to do with Frank's article and, in general. you've adduced no empirical arguments whatsoever. As I say above, I believe your assumptions as to real wages are faulty. Sorry, flow, but the truth is that your participation in this thread, thus far, is 100% ideology. Gotta be polite here. The truth is my Asian industrialization point has more to do with comments made by Mandelstam than by Frank. Furthermore, I've made no assumptions about real wages, I'm reporting facts about my memory of (among other sources) the back pages of The Economist, where they show wage growth and inflation of a variety of countries each month. Facts that, OBTW, were not disproved by jshore (although we have some literary disagreements with what exactly Frank said).

When I originally cited "the Washington Consensus" and the "Golden Straightjacket", I was referring to Frank's tendancy to misuse key phrases. I was a bit off in the former case - I was using the original definition which has since been superceded - but my point is that Frank's analysis tends towards the, um, impressionistic.

100% ideology: Bullshit. Look back in the thread. I grant Frank's point about CEO compensation, but I make another point about real wages - a point backed up by jshore's 2 links. I don't claim that the record is clear regarding the developmental policies of East Asia -you are the one who claims it's "common knowledge"- rather I say that "it's a highly contentious issue".

What separates ideologues from analysts is the latter's willingness to weigh conflicting evidence, usually at the expense of clarity and narrative convenience.

[Measure for Measure]

Now, then, for some empirical reality. I busted my chops trying to get median wage data from the CPS (which would have abstracted away from compensation flowing to CEOs and other high wage earners) but was unable the historical data on the BLS website. (grrrrr.)

I do, however, have some GDP share data that the group may or may not find interesting.
The following represents shares of national income devoted to total compensation (wages + other labor income (benefits)), wages, benefits, corporate profits, proprietary income and net interest. Note that wages and benefits don't total up to total compensation. I've forgotten what the missing element is.

date total comp wages benefits Corp Prof Prop Y Net Interest
1973q4 71.4% 62.2% 4.4% 9.5% 10.8% 5.1%
1974q4 74.2% 64.0% 4.9% 8.2% 9.4% 6.2%
1975q4 72.1% 61.6% 5.1% 10.9% 9.4% 5.9%
1976q4 73.2% 61.8% 5.7% 10.4% 9.2% 5.9%
1977q4 72.2% 60.6% 5.9% 11.3% 9.1% 6.3%
1978q4 71.5% 60.0% 5.9% 11.8% 9.0% 6.6%
1979q4 72.6% 60.6% 6.0% 10.1% 8.7% 7.7%
1980q4 73.4% 61.1% 6.2% 8.7% 8.1% 8.8%
1981q4 73.5% 61.0% 6.2% 7.5% 7.1% 9.9%
1982q4 74.2% 61.3% 6.4% 6.1% 7.3% 9.8%
1983q4 72.9% 60.2% 6.2% 7.5% 6.9% 10.1%
1984q4 71.6% 58.9% 6.0% 7.0% 7.7% 10.2%
1985q4 72.1% 59.4% 6.0% 6.5% 7.9% 10.1%
1986q4 73.2% 60.2% 6.2% 6.4% 7.9% 10.0%
1987q4 72.0% 59.4% 6.2% 7.4% 7.9% 9.8%
1988q4 71.4% 59.0% 6.0% 8.3% 7.8% 9.8%
1989q4 72.3% 59.6% 6.4% 7.4% 8.1% 10.3%
1990q4 72.2% 59.3% 6.6% 7.6% 8.0% 10.1%
1991q4 73.0% 59.6% 6.9% 7.8% 8.0% 9.0%
1992q4 72.6% 59.2% 7.1% 8.2% 8.6% 8.1%
1993q4 71.9% 58.3% 7.3% 9.4% 8.6% 7.3%
1994q4 71.2% 57.9% 7.1% 9.7% 8.3% 7.5%
1995q4 70.7% 58.1% 6.5% 10.7% 8.3% 7.0%
1996q4 70.7% 58.5% 6.1% 10.8% 8.4% 6.6%
1997q4 70.9% 59.0% 5.9% 10.9% 8.2% 6.4%

Yikes, let's summarize

date total comp wages benefits Corp Prof Prop Y Net Interest
1992q4 72.6% 59.2% 7.1% 8.2% 8.6% 8.1%
1995q4 70.7% 58.1% 6.5% 10.7% 8.3% 7.0%
change: -1.9% -1.2% -0.5% 2.5% -0.3% -1.1%

1997q4 70.9% 59.0% 5.9% 10.9% 8.2% 6.4%
ch92-97 -1.8% -0.2% -1.2% 2.7% -0.3% -1.7%

Too bad I don't have data through 1999; I missed a lot of the real-wage growth era. Note the big increase in corporate profit shares. Weirdly, the bottomed during the Reagan era and grew by leaps and bounds during the Clinton period.

I thought I'd be able to tell a story centering around another trend reversal, that relating to slower growth in health costs. But declining benefit shares of -0.5% are smaller than the decline in wage shares (-1.2%). So for the 1992-1995 era, the Frank story about Robber Barons squeezing the workers can be supported.

The trend appears to reverse itself between 1995 and 1997. Big picture change? Corporate profits, as a share of the economy, rose from 1992-1997. A little less than half of that was related to declines in compensation shares (mostly benefits, not wages). The other half was due to... declines in interest rates.

Interestingly, the suits can thank Clinton in both cases. Declines in health care expenses are thought to be related to the growth of managed care, a trend that was accelerated by Clinton's unsuccessful attempt at health care reform. And Clinton's attack on the deficit (and to a lesser extent Rubin's boring and predictable signalling to the bond market) helped lower long term interest rates.

Finally:
Those who believe that wages can grow at the same rate as productivity are implicitly assuming some combination of shrinking profit shares, and more important, much lower growth in health care expenses. It is the latter element which make Frank's apparent social security assumptions less plausible.

[Measure for Measure]

Originally posted by erislover
...my intent wasn't to say that meat packing industry should be self-regulated per se, but rather that the workers, as part of a union or other less formal organization, have the ability to ensure that the job is done right...They may have the ability. They don't necessarily have the incentive, though....the point is that labor unions serve as a check on employers. Regulation serves as a check on employers. I think that putting two and two together here is something that should be considered. And my point is that labor unions serve as a check on employers in some ways (eg safety standards) but not in others (eg pollution). And that we shouldn't expect them to (though we may part company on this latter point).

Democratic governments, OTOH, have an incentive to avoid scandals (such as an excess of rotton meat being sold). (Policy entrepreneurs have an incentive to find scandal -perhaps the meat has higher-than-acceptable-levels of, um, MSG).

And inspectors have an incentive to do their job, provided they operate within a noncorrupt judicial system. Which is not to say that rule of law is easy to establish.

Perhaps we have to add another continent (in addition to Oceania, et al) full of environmentalists, consumer activists, NGOs and other assorted do-gooders. Call it Naderland.

[Measure for Measure]

Frank says It is this intellectual unanimity about the nature and the purpose of economies, as much as the technological advances of recent years, that we refer to when we talk so triumphantly about the "New Economy." It is this nearly airtight consensus--this assurance that no matter what happens or who wins in November, a strong labor movement and an interventionist government will not be returning--that has made possible the unprecedented upward transfer of wealth that we saw in the Clinton years, that has permitted the bull market without end, and that has made the world so safe for billionaires. Frank seems to make a number of varied points here. It seems to me that he is claiming that there is "intellectual unanimity" about the purpose and nature of economies. Controlling for hyperbole, I agree.

Furthermore, this POV is antithetical to a strong labor movement and interventionist government, as I read Frank. On that, I disagree, assuming I understand him correctly. Much of what I said above was illustrating the gap between the "intellectual consensus" and the doctrine of "market fundamentalism". This gap is not limited to 3rd world development issues; indeed, many of the prescriptions given to the third world (eg. tax reform, investment in human capital, fiscal restraint) have their origins in US debates.

[erislover]

Originally posted by flowbark
They may have the ability. They don't necessarily have the incentive, though.No kidding. I think this applies to every single job anywhere.Democratic governments, OTOH, have an incentive to avoid scandals (such as an excess of rotton meat being sold). (Policy entrepreneurs have an incentive to find scandal -perhaps the meat has higher-than-acceptable-levels of, um, MSG).I don't see how this is a political scandal that will cause a shift in government.And inspectors have an incentive to do their job, provided they operate within a noncorrupt judicial system.How?Perhaps we have to add another continent (in addition to Oceania, et al) full of environmentalists, consumer activists, NGOs and other assorted do-gooders. Call it Naderland.Fine by me. The more people there are acting as power brokers the less they each have.

[jshore]

Originally posted by flowbark
But jshore's LBO link was really great. "If there are real real wage gains, then it's about damn time." Precisely. And my eyeballing of their productivity chart suggests that compensation and productivity were moving in lockstep during the late 1990s -- for the first time in about 20 years. To me _that_ would be the greatest accomplishment of the New Economy.

Yes, but the point is that if we have to wait for the economy to totally catch fire and record low unemployment rates to make labor incredibly scarce in order to just get compensation to increase as fast as labor productivity, then what pray tell is going to happen the rest of the time? That's sort of like trying to sell me a car by telling me that it can easily do 65 on the highway for a stretch of about 15 minutes of the time out of every hour (with it piddling along at about 30 the rest of the time). Should I buy such a car?

As for your GDP share data, I am actually a bit puzzled by why it doesn't seem to jive with the story told by the LBO curve. It doesn't directly contradict it, but certainly doesn't show what I would expect it to if the two as being totally consistent. Do you understand it?


Those who believe that wages can grow at the same rate as productivity are implicitly assuming some combination of shrinking profit shares, and more important, much lower growth in health care expenses. It is the latter element which make Frank's apparent social security assumptions less plausible.

Well, this is true technically but I am not convinced it would have that large an effect. For one thing, your GDP share data still shows that the ratio of benefits to wages has been fairly steady at a ratio of 1:10 after a climb during the mid 70s. So, even if benefits for medical continue to rise at rapid rates, it seems like it would have to be really quite dramatic in order to make compensation rates rise at a much faster rate than wages. As a concrete example, I assumed that over the next 40 years, total compensation rises at an annual rate of 2.1% (Bush's number for labor productivity through 2012). I then assumed that the ratio of wages to benefits goes from 10:1 to 5:1. And, I still get that wages rise at an annual rate of 1.9%. (Of course, if health care costs continue to spiral out of control, my guess is that at some point we will get away from a system where employers pay for health care or at least to the same extent they do now...i.e., I find it hard to believe that the ratio of wages to benefits will even double.)

[jshore]

Originally posted by jshore
i.e., I find it hard to believe that the ratio of wages to benefits will even double.

Of course, I should have said "the ratio of benefits to wages..." there.

[Measure for Measure]

Originally posted by jshore
Yes, but the point is that if we have to wait for the economy to totally catch fire and record low unemployment rates to make labor incredibly scarce in order to just get compensation to increase as fast as labor productivity, then what pray tell is going to happen the rest of the time? I'm losing the thread here. I was just trying to show that the 1990s were not a period where the suits were particularly adept on putting the screws on the workers. Indeed, during the mid to late 1990s, the median worker appeared to make consistent real wage gains for the first time in decades. My fire was directed at Frank; it wasn't a defense of the status quo.

When I saw real wage growth turn positive after many years I can recall thinking (like the LBO), "Yeah, it's about time."
As for your GDP share data, I am actually a bit puzzled by why it doesn't seem to jive with the story told by the LBO curve. It doesn't directly contradict it, but certainly doesn't show what I would expect it to if the two as being totally consistent. Do you understand it?No. I haven't pulled together all the data and given it an interpretation. Recall though, that compensation shares will change not only with increases in wages and benefits, but also with increases in employment. (It's possible to decompose changes in national income into various components, including employment, wage and benefit growth though.)

Separately, I speculate that part of the wedge between labor productivity and compensation1 was due to increased factor costs: in the 1970s that means higher energy prices and during the 1980s it means higher interest payments. (Of course, it's true that energy prices dropped during the 1980s.)

And, yes, declining unionization from 1973 - ??? also probably played a role.

There's another possible explanation for rising profits. There was a big investment boom during the 1990s. When a machine is sold from one company to another, the seller books the sale as revenue, but the buyer gets to spread the cost out over many years. Thus, a jump in investment will result in a leap in economy-wide accounting profits. Or so I've read.

RE: Soc. Security, wages and benefits: Let me get back to you on that. I need to do some scribbling.

1And I was pleased that LBO looked at total compensation, rather than "cheating" (sort of) and just looking at wages.

[Measure for Measure]

Originally posted by jshore
Well, this is true technically but I am not convinced it would have that large an effect. For one thing, your GDP share data still shows that the ratio of benefits to wages has been fairly steady at a ratio of 1:10 after a climb during the mid 70s....1) When I fooled around with my spreadsheet, I got similar numbers FWIW:

Over the next 10 years:
If Health care costs (benefits, actually) increase at 4.2% and compensation increases at 2.1%, then wage growth increases at 1.9% and the ratio shifts from 1:10 to 1:8 after 10 years.

That's an optimistic scenerio.

If benefits increase at 5.5% and compensation increases at 2.1%, then wage growth increases at 1.7% and the ratio shifts from 1:10 to 1:7 after 10 years.

That's a middle scenerio.

If benefits increase at 6.7% and compensation increases at 2.1%, then wage growth increases at 1.5% and the ratio shifts from 1:10 to 1:6.4 after 10 years.

That's a pessimistic scenerio, although health care costs were growth that fast before 1992.

2) Compound growth can be pretty powerful, so the difference between 1.9 and 2.1% may be nontrivial. But I'll concede the point anyway.

3) 2.1% seems high, as a long term growth rate in productivity. (REM: 2.5% is a central forecast for long run US real GDP growth - that includes ?1%? growth in the labor force). But perhaps Frank was saying that his plan had similar assumptions as the one he was comparing it to.

[jshore]

flowbark,

But if you look at the numbers that you have provided showing the ratios of wages to benefits, they have generally been constant at about 10:1 except for a spike down to about 8:1 in the early 90's. So, I don't understand why your pessimistic scenario is likely to be anywhere in the cards. Remember that benefits are more than just health care and that employers react to increasing health care costs in a variety of ways including passing off more of the costs to workers, providing the benefits to fewer workers, ... After all, haven't health care costs risen at a high rate for much of the last 25 years and yet there has been little change in this ratio?!?