Hannah Arendt Center for Politics and Humanities
3Jul/140

Video Archives – Panel One of “The Burden of Our Times” (2009)

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A new weekly feature on the Blog, the Arendt Center uses its video archives to remember all of the exciting events it has hosted over the years. This week, it revisits the first panel of its second annual fall conference, "The Burden of Our Times."

17Jan/140

On Civic Journalism

ArendtWeekendReading

In Pilgrim’s Progress, John Bunyan describes a man with a Muck Rake, a man who looks only down, raking the muck off the floor. Earthly, gazing down, collecting the muck around himself, the Muck Raker sees only the detritus of our world. He never looks up, neither into the heavens or even into the face of another. For Bunyan, the Muck Raker is blind to the spiritual and sublime.

The journalists who beginning in the late 19th century came to be called Muckrakers looked down at the painful truth that was America in an age of corruption, inequality, and corporatism. As Doris Kearns Goodwin describes in her excellent new book Bully Pulpit, the muckrakers turned a “microscope on humanity, on the avarice and corruption that stunted the very possibility of social justice in America.”

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One of the central storylines of Kearns Goodwin’s Bully Pulpit is the alliance between Theodore Roosevelt and the Muckraking journalists around McClure’s Magazine. Roosevelt met frequently with Sam McClure and his writers, feeding them stories and also soliciting their advice and knowledge as he promoted his progressive agenda and took on corporate trusts. Roosevelt both needed the journalists, but also feared the excess of their truthtelling zeal. Here is how Teddy Roosevelt describes the Muckrakers in one speech from 1906:

In Pilgrim's Progress the Man with the Muck Rake is set forth as the example of him whose vision is fixed on carnal instead of spiritual things. Yet he also typifies the man who in this life consistently refuses to see aught that is lofty, and fixes his eyes with solemn intentness only on that which is vile and debasing. Now, it is very necessary that we should not flinch from seeing what is vile and debasing. There is filth on the floor, and it must be scraped up with the muck rake; and there are times and places where this service is the most needed of all the services that can be performed. But the man who never does anything else, who never thinks or speaks or writes, save of his feats with the muck rake, speedily becomes, not a help but one of the most potent forces for evil.

The McClures crowd always insisted that they “muck-raked never to destroy, but with utter faith in reason and progress.” It was because McClure and his writers “criticized in full confidence that, once understood, evils would be speedily corrected,” that they so fully gained Roosevelt’s trust and confidence. What Kearns Goodwin so vividly makes clear was the power of such an alliance between crusading journalists and a courageous politician.

Complaints about the contemporary state of the press are common. Rarely, however, does someone lay out in stark detail both the failures of the press, as well as providing insight into when, why, and how the press does succeed in fulfilling its role as the watchdog of corruption and the attendant for crusading change. But that is just what Dean Starkman does in his new book The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism (recently excerpted in Columbia Journalism Review).

Starkman sets out to argue a simple thesis: “The US business press failed to investigate and hold accountable Wall Street banks and major mortgage lenders in the years leading up to the financial crisis of 2008. That’s why the crisis came as such a shock to the public and to the press itself.” In short, he argues that if the press had done a better job of alerting the public and our political leaders to the corruption and crises within the mortgage markets, the financial crisis likely could and would have been avoided.

Starkman offers an optimistic view. It is based on the assumption that the people and our leaders actually respond to rational warnings. It is equally likely, however, that the press doesn’t warn us because we don’t really want to be warned. Over and over again on questions of importance from torture to totalitarianism and from corruption to criminality, complaints that the press failed are myopic. In nearly every case, the press has indeed reported the story. What has happened, however, is that the hard-hitting stories about torture or cover-ups or financial misdeeds rarely find an audience when times are good or the country feels threatened. The problem, indeed, may be less a feckle press than dormant population.

The beauty of Starkman’s analysis is that he makes clear that serious muckraking journalism about the illegal and corrupt practices in the mortgage lending industry did appear if briefly—it just had little effect and faded away. While most of these articles appeared in small non-mainstream journals, some larger papers and magazines like Forbes and the Wall St. Journal did run such hard-hitting investigative reports. The problem is that they did so only early on in the build up to the crisis—from 2001-2003. After that period, they dropped the ball. Starkman sees this as evidence that the press did not bark. On one level he is right. But it could also be seen as evidence that the press barked and learned a sad lesson: That so long as chickens were plentiful, the people didn’t care to know that the fox was in the hen house.

The lesson Starkman draws is different. It is that we need to preserve the muckraking tradition, which now goes under the bland professionalized name of “accountability reporting.”

Now is a good time to consider what journalism the public needs. What actually works? Who are journalism’s true forefathers and foremothers? Is there a line of authority in journalism’s collective past that can help us navigate its future? What creates value, both in a material sense and in terms of what is good and valuable in American journalism?

Accountability reporting comes in many forms—a series of revelations in a newspaper or online, a book, a TV magazine segment—but its most common manifestation has been the long-form newspaper or magazine story, the focus of this book. Call it the Great Story. The form was pioneered by the muckrakers’ quasi-literary work in the early 20th century, with Tarbell’s exposé on the Standard Oil monopoly in McClure’s magazine a brilliant example. As we’ll see, the Great Story has demonstrated its subversive power countless times and has exposed and clarified complex problems for mass audiences across a nearly limitless range of subjects: graft in American cities, modern slave labor in the US, the human costs of leveraged buyouts, police brutality and corruption, the secret recipients on Wall Street of government bailouts, the crimes and cover-ups of media and political elites, and on and on, year in and year out. The greatest of muckraking editors, Samuel S. McClure, would say to his staff, over and over, almost as a mantra, “The story is the thing!” And he was right.

Starkman opposes “accountability reporting to “access reporting,” what he calls “the practice of obtaining inside information from powerful people and institutions.”  The press relies too much on simply telling us what the companies want us to know rather than digging deeply to tell the untold story. This is even more the case in the internet era, Starkman worries, because news organizations are cutting budgets for investigative reporters as the economics of journalism turns to commentary and linking rather than investigation. What the public needs, he writes, is a public-centered support for accountability journalism in the mainstream media.

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To buttress his claim, Starkman invokes Walter Lippman.

Walter Lippmann is as right today as he was in 1920. It’s not enough for reporters and editors to struggle against great odds as many of them have been doing. It’s time to take the public into our confidence. The news about the news needs to be told. It needs to be told because, in the run-up to the global financial crisis, the professional press let the public down.

But after his early call for a better kind of public-spirited journalism in 1920, Lippmann shifted gears with the publication of Public Opinion in 1922. As Jim Sleeper writes recently in Dissent, Public Opinion was much less optimistic about the power of the press to serve the public good.

Lippmann later claimed to identify something more profoundly problematic than bad reporting: “the very nature of the way the public formed its opinions,” as his biographer Ronald Steele put it. He despaired of a public of citizens with enough time and competence to weigh evidence and decide important questions, and in 1922 he published Public Opinion, which contended that experts needed to be insulated from democratic tempests when making decisions, which could then be ratified by voters. Lippmann’s contemporary John Dewey called it “perhaps the most effective indictment of democracy as currently conceived ever penned.”

Sleeper recognizes, in a way Starkman does not, that such optimism runs counter to Lippmann’s powerful conclusions about the formation of public opinion in democracy. Sleeper nevertheless praises “Starkman’s civic faith, which enables him to distill from his experience some real clarity about journalism and its proper mission.” Undoubtedly the mission is laudable. His story about journalism should be told. Starkman does it well and it should be read. It is your weekend read. As you do so, ask yourself:  If we want to revitalize democracy can a revitalized muckraking journalism lead the way?

-RB

30Sep/130

Amor Mundi 9/29/13

Arendtamormundi

Hannah Arendt considered calling her magnum opus Amor Mundi: Love of the World. Instead, she settled upon The Human Condition. What is most difficult, Arendt writes, is to love the world as it is, with all the evil and suffering in it. And yet she came to do just that. Loving the world means neither uncritical acceptance nor contemptuous rejection. Above all it means the unwavering facing up to and comprehension of that which is.

Every Sunday, The Hannah Arendt Center Amor Mundi Weekly Newsletter will offer our favorite essays and blog posts from around the web. These essays will help you comprehend the world. And learn to love it.

Empathy for Machines

machineMegan Garber points to research that suggests that soldiers who use battlefield robots as part of their missions often become quite fond of, maybe even empathetic towards, their helpers. "It makes sense that the tools that do so much work in the high-stakes environment of the battlefield would engender devotion from the people they benefit. According to... research, the soldiers assigned their robotic companions 'human or animal-like attributes, including gender.' Furthermore, they 'displayed a kind of empathy toward the machines.' And ‘they felt a range of emotions such as frustration, anger, and even sadness when their field robot was destroyed.'" Machines are increasingly able to act “as if they are human,” even when they are simply following complex algorithms. Shirley Turkle has shown how even people who understand the robotics involved develop deep human emotions for their robots. And David Levy has proposed legalizing marriage with robots. The question is: As we learn to love and relate to robots that are tireless, devoted, and obedient, how will that impact our relationships with humans who are often tired, cranky, and stubborn?

By the way, Megan Garber will be speaking in NYC on Oct. 27th along with Jay Rosen, Walter Russell Mead and Roger Berkowitz at the Bard Graduate Center as part of the Hannah Arendt Center’s panel on Blogging and the New Public Intellectual. Information here. RSVP at arendt@bard.edu.

Seeing America

ladiesIn a consideration of MoMA's recently erected gallery of Walker Evans photographs, James Polchin emphasizes just how shocking Evans' photographs were when he took them more than three quarters of a century ago, suggesting that he did little other than represent what was: "Evans’ images exude a longing and melancholy for something lost. They are relics of a past, as much today as they were 75 years ago. They are decrepit sharecropper porches, ornate Victorian architecture, and decaying southern verandas. They are hauntingly empty small-town street corners and portraits of people who seem to have no place to go. There is in American Photographs no modernist romance of a dynamic future, no awe of machines or the possibilities of the future that were so often modernism’s compelling allure. Instead we are left with a certain absence that is both material and psychological. American Photographs remind us that modernism was also heaped in a kind of creative longing for all that was disappearing."

At What Cost Nature

jbIn an interview, J.B. Mackinnon, author of the recent book The Once and Future World: Nature As It Was, As It Is, As It Could Be talks about what it would mean to "rewild" the planet: “I now find myself comparing co-existence with other species to life in a multicultural city: it’s complicated and demands innovation and often education, but when it works it creates the most exciting societies the world has ever known. Few people who live in multicultural cities would say it’s easy, but even fewer, I think, would say they would prefer homogeneity. The shared culture of difference becomes a part of our individual identities, and at that point, a harm to diversity really does become a harm to us all. Now consider a similar relationship, this time not to cultural but to ecological complexity, and we have what I would consider the rewilding of the human being. Ecology as a part of identity." An interesting thought experiment, but who does MacKinnon have to displace to make it work? Perhaps more importantly, is such an environmental modification really returning to nature in some way, or is it instead more proof of man's supposed mastery over his environment? Indeed, isn’t so much of the talk about sustainability and the preservation of nature rather a furthering of the human desire to master, control, and make of nature what man wants—except that we now want nature to be natural. Marianne Constable makes this argument beautifully in her essay “The Rhetoric of Sustainability: Human, All Too Human,” available in HA: The Journal of the Hannah Arendt Center.

What is the Debt Crisis?

greekIn order to better understand the situation in Greece, Arnon Grunberg went to Thessaloniki, the country's second largest city. There, he met with the mayor and some of the city's citizens; one of them, Debbie, echoes Arendt when she talks about what Greeks might glean from their current situation: “Efficiency is a capitalist term that assumes one has the goal of achieving a certain level of productivity. That’s not the way we think. Capitalism, of course, is what sired this crisis. But the crisis is also an opportunity to ask the right questions. We want to teach people that they have the power to fight back. No one can take away your dignity, that’s what I tell them. No one has to be embarrassed by the fact that the system can’t guarantee that everyone has health insurance. The power of capitalism lies in how it presents itself as the sole alternative. I don’t have any illusions about ever seeing it disappear, but we can create little fissures in it.”

From the Hannah Arendt Center Blog

This week on the blog, Jennifer Hudson writes about the “False Culture of Utility” in an excellent Quote of the Week coming from a reading of Arendt’s essay “The Crisis of Culture.” In advance of our sixth annual conference next week, "Failing Fast: The Educated Citizen in Crisis," your weekend read is on the topic of education.

Featured Events

smallfailingOctober 3-4, 2013

The sixth annual fall conference, "Failing Fast:The Educated Citizen in Crisis"

Olin Hall, Bard College

Learn more here.

 

 

 

 

 

29Nov/120

The Bureaucracy of Sandy

The after effects of Super-storm Sandy are felt from the beaches to the statehouses. First of all, let’s realize it was not a hurricane, but a freakish combination of storm systems. Super-storm is more truthful than hurricane. Whatever it was, it has upended lives, and politics.

The Financial Times reports today that Governor Chris Christie of New Jersey has now joined NY Governor Andrew Cuomo in requesting not only emergency aid to repair the damage caused by the storm, but also preventative money to build dunes, use eminent domain to purchase property, and generally re-engineer the New Jersey coastline.

The political transformation here is lost on few. As the FT writes:

Mr. Christie, a Republican, has previously sounded more skeptical than Mr. Cuomo, a Democrat, about using state powers to dictate how the state was rebuilt. But he said on Wednesday he might take away local towns’ power to grant “easements” to homeowners objecting to new dunes blocking their sea views and would not rule out using government powers to purchase properties it believed were in the wrong place.

“I have to protect the Jersey shore, both as an economic engine and as a cultural engine,” Mr. Christie said.

The desire to take away local powers and give them to states and to take away state powers and give them to the federal government is neither a democratic nor a republican idea anymore. While the party of the elephant may give lip service to local governance, it has rarely, if ever, backed that up with action. As is now well known, the federal government has grown as fast if not faster under Republican Presidents than it has under democratic.

Hannah Arendt argued that the greatest danger to freedom in the United States was the rise of a large and bureaucratic government. She worried, as she once wrote, that the true threat to freedom was the sheer size of America alongside the rise of a technocracy. The sheer size of the country combined with the rising bureaucracy threatened to swallow the love for freedom she saw as the potent core of American civic life.

Chris Christie and Andrew Cuomo may well be their respective parties’ nominees for President in 2016. They are both deeply popular and have taken a pragmatic and largely centrist approach to governing at a time of financial crisis and natural disaster. And yet, from an Arendtian angle, it is striking that both governors have so internalized the view that problems are to be solved by bureaucrats and technocrats rather than on a local level.

That the bureaucratic approach is so entrenched should not be a surprise. It is both a consequence of a further spur to the retreat from politics that Hannah Arendt describes. Even Christie’s insistence that he must save the Jersey shore as an economic engine shows the near complete victory of economic thinking over politics.

-RB

31Aug/123

The President’s Failure and His Challenge.

I spoke with my daughter this morning. She is seven. I asked her what she thought of Mitt Romney's speech. She answered: "Both he and President Obama tell lies simply to get elected." Now I know she is to some extent parroting what she hears around our dinner table and the playground. But there is something deeply disheartening in her seven-year-old cynicism. There is a deep sense not only that our politicians lie, but also that the Presidency is a broken institution. That the President is captive of interests special and not-so-special. That the President is trapped in a bureaucracy impervious to change and that the President, whomever he or she may be, cannot really change the perilous course on which our nation is headed. This indeed is the topic of an upcoming conference, "Does the President Matter? A Conference on the American Age of Political Disrepair."

There are myriad sources for this pessimism that one hears from seven-year-olds, college students, and adults. It is markedly different from the idealism that swept the country four years ago personified in Barack Obama. More so than any time I know of, there is a sense of total hopelessness; a feeling that neither party and no potential president can possibly change our course for the better.

To understand this ennui, one must take President Obama's failure seriously. That failure is simple. He became President amidst the perceived failure of the presidency of George W. Bush. The Country desperately wanted a change.  At the same time, the financial crisis threatened to overwhelm the nation. The President offered hope. He embodied all of our dreams, offering a way forward, out of the excesses of the Bush era and towards a re-enlivening of basic American values of freedom and fairness. There was, in the President's own words, a demand for a "new era of responsibility."

The force of Mitt Romney's Convention speech on Thursday was his expression of disappointment in the President. This strikes me as a non-partisan statement and that is its strength. It is hard to find even the most stalwart of President Obama's supporters who will disagree with this assessment. Where does it come from? Why has Obama disappointed us?

One answer comes from Kathleen Hall Jamieson, one of the leading thinkers of Presidential rhetoric of our time. Jamieson has given analyses of many of President Obama's speeches, and his found them deeply wanting. In her 2010 address to the American Political Science Association, she says:

In other words, Barack Obama was never as eloquent as we thought he was. A person matched a moment with rhetoric in a context in which the audience created something heard as eloquence. Widely labeled as eloquent, he creates expectations for his presidency that he cannot satisfy in the presidency barring that he is Abraham Lincoln with the Gettysburg Address or a Second Inaugural in his pocket.

So on the one hand, Obama set the expectations for himself too high. That may be, but it is also the case that he became President at a time of great crisis. Maybe it wasn't a Civil War, but the financial crisis does threaten the future of the United States. One fault of the President is that he has continued to describe the financial crisis as a temporary setback, one that will cause some pain but will pass. He has not taken the financial crisis seriously enough, and categorized it for what it is, a crisis. By refusing to do so, he has lost the opportunity  to become a crisis President.

In a recent post, I discussed Roberto Magabeira Unger's insistence that we need a wartime President now without a war, one who rallies the nation to change and sacrifice towards a future goal. What Obama has refused to do is present his vision of where we should go. He speaks about change, but doesn't offer a sense of what that change might be. In Jamieson's analysis, he has failed to provide a rhetorical speech that offers us "a digestive sense of what this presidency is going to do."

A digestive statement for Jamieson is something like John F. Kennedy's question: "Ask not what your country can do for you..." As Jameison writes, such statements "sound as if they're sound bites until you realize that there's a definition underlying a presidency in those kinds of statements." Kennedy meant something with his question, something he backed up with the idea of the Peace Corps and public service.

The problem with President Obama's rhetoric, and thus his presidency, is that he has yet to find such a digestive statement that defines what he cares about and what he believes this country is about. As Jamieson writes, there is nothing like Kennedy's invocation of the Peace Corps or communal sacrifice that defines or articulates Obama's vision for America. There is no theme of "transformation of generational identity." She writes: "Indeed, I would challenge you to give me a phrase that is memorable at all, that defines who we are and where we're going under this presidency."

Jamieson's critique of the President is harsh. But I think it is accurate. That is the reason why Romney's claim of disappointment strikes me as powerful. Whether Romney offers an alternative is hard to know, since he himself seems to change his opinions and views weekly. That said, President Obama has his work cut out for him. He must show us that he can articulate a response to the disappointment people feel and provide the hope that he can still get the country back on track, even after three years of failing to do so.

The crises the President inherited are not his fault. It is disgusting to hear Paul Ryan and others blame the President for every problem in the United States. And despite Mitt Romney's impressive past history, his willingness to change his positions regularly and disavow past achievements raises serious questions about his own ability to lead. And yet, it is undeniable that after three years, the financial crisis is still with us and the political crisis is worse than ever. At some point, the President must take responsibility for his failure to address these crises and offer hope that he has a plan to address them in the future. That is the President's challenge during his convention speech next week. To somehow try to answer the criticism that after three years, we still don't know what it is that President Obama believes in and how he wants to respond to the financial and political crisis that he inherited.

In thinking about what the President will say on Thursday, I encourage everyone to read Jamieson's analysis of the past failure of Obama's rhetoric. It is your weekend read. And if you want to think further about the challenge of the president to lead in times of crisis, think about attending the Hannah Arendt Center's upcoming conference, "Does the President Matter?"

-RB

 

15May/121

The Best and the Brightest

Ina Drew has resigned. Why wasn't she fired?

Drew is the executive at JPMorgan being asked to fall on her sword for the $2 Billion+ loss in hedging trades. Jamie Dimon, who for four years has taken credit for running a tight ship in which he was responsible for steering JPMorgan through the financial crisis, will of course soldier on, beaten but not broken.

Aside from allowing her the dignity of not being fired, the resignation also, I have to imagine, preserves what must be a very generous severance package.  All present reports refuse to disclose Drew's severance package. She was paid $15.5 million last year and almost $16 million in 2010. What justification is there for now allowing her to resign and potentially keep a severance?

The answer seems to be that Drew, like all the executives on Wall Street, deserves their stratospheric compensation. This of course was Dimon's point in his announcement of her resignation. He writes:

Ina Drew has been a great partner over her many years with our firm. Despite our recent losses in the CIO, Ina’s vast contributions to our company should not be overshadowed by these events.

In other words, Drew is brilliant and has been valuable. She should not be blamed for losing $2 Billion. She still deserves what is reported to be a severance package of over $14 Million in equity rewards, according to the Wall Street Journal.

The canard of the best and the brightest is one we hear over and over. The basic fallacy here is the belief that these executives are so smart and so valuable that they can't be angered or let go.

The fact that these blow-ups keep happening has done little to quell the applause for the bankers. All the incentives are for the executives to take on risk. What happens when they lose? They resign. I am sure Ina Drew is smart and capable and no doubt she will be back at a hedge fund or a new firm as soon as she wants.

The bigger issue, however, is that there is still the feeling around that these executives deserve to be making tens of millions of dollars every year. Recall that back in 2009 after the best and brightest brought the country's best (i.e. biggest) banks to their knees at the federal taxpayers' dole, Ken Feinberg was appointed to oversee bonuses and compensation at those banks. He has told how the big banks decided that every single one of their executives had performed above average and deserved extravagant bonuses. In an article about Feinberg from 2009, Steven Brill writes:

To take a near-comic example, the firms did not present a single executive as meriting a pay grade below the 50th percentile of their supposed peer group.... In fact, all 136 of the executives (the 25 top earners for each of the seven companies, less 39 who left during the year) were depicted as well above average, typically in the 75th percentile or higher. And the peer groups they were supposed to be in were often inflated; for example, someone running a unit might be portrayed as a chief executive because, the argument went, he ran a really big unit.

Citigroup and Bank of America, Brill writes, "concluded that everyone in their executive suites was above average when compared with peers at other giant banks that didn’t need a bailout." The banks then proposed that their average executives deserved bonuses of between $10-$21 million. After months of negotiating and cajoling, Feinberg talked them down, so that in the end, the average banker received a year-end bonus of $6.5 million at Bank of America and $6.2 million at Citigroup.

Those paltry $6 million bonuses were in a year that the banks went bankrupt and had to be bailed out. No wonder the best and the brightest like Drew deserve $14 and $16 million when times are good. Of course, the incentives to take risks are still there. If your risks work out, you make a fortune. When your risky trades go bad, you resign and take your winnings and your severance.

These bankers have nothing at risk and everything to gain by taking risks. Four years after the financial crisis, it seems that little if anything has changed.

-RB

20Apr/120

The Way Forward

It is a fallacy to think that political thinking can exist separately from economic thinking. Hannah Arendt, no economist, saw clearly that the origins of totalitarianism were, in large part, traceable to the importing of economic thinking (unlimited growth) into the political realm, where politics is concerned with geographical, social, and moral limits. The economic victory over politics at that time went under the name of imperialism. Today, under the rubric of globalization, economic thinking continues to subsume political thinking to economic calculations.

The economic crisis of the last four years has brought with it a particular challenge to politics. The crisis is so large and so devastating and it so completely threatens to undermine our ways of life that there is a feeling of political futility. What possibly can be done to address this crisis? From out of this futility arises a kind of head-in-the-sand approach that denies the crisis instead of addressing it. One end point of such an approach is the kind of technocratic governance by bureaucrats now holding sway in Greece and Italy, as well as in a selection of American cities and counties. If we are to avoid giving up our political self-determination and if we want to engage the crisis rather than submit to it, we must first understand it, something that few politicians have been willing to do.

To confront the depth of our ongoing crisis, it is helpful to look at a new report out from the New America Foundation, authored by Daniel Alpert, Robert Hockett, and Nouriel Roubini. This report was sent to me by a long-time supporter of the Arendt Center. It is well worth reading in full.  A few basic facts to set the stage:

•Four years into the Great Recession, more than 25 million working-age Americans remain unemployed or underemployed;

•The employment-to-population ratio lingers at a near-historic low of 58.3 percent;

•Consumption expenditure remains weighed down by massive private sector debt overhang left by the bursting of the housing and credit bubble a bit over three years ago (even if debt levels are coming down, as Floyd Norris argued today in the NY Times.)

The basic argument that Alpert, Hockett, and Roubini make is that economists and politicians have misunderstood the nature of the financial crisis. As a result, our responses have been ineffective. As they write: "The principal problem in the United States has not been government inaction. It has been inadequate action, proceeding on inadequate understanding of what ails us. "

So what is really the problem? Alpert, Hockett, and Roubini argue that the crisis is a conjunction of an extreme a credit crisis along with two other long-term trends that exacerbate that crisis. While most commentary and political response has focused on the credit crisis, the importance and impact of the two long-term trends have been largely overlooked. The two trends are:

First, the steady entry into the world economy of successive waves of new export- oriented economies, beginning with Japan and the Asian tigers in the 1980s and peaking with China in the early 2000s, with more than two billion newly employable workers.

Second, the "long term development that renders the current debt-deflation, already worse than a mere cyclical downturn, worse even than other debt-deflations is this: The same integration of new rising economies with ever more competitive workforces into the world economy also further shifted the balance of power between labor and capital in the developed world. That has resulted not only in stagnant wages in the United States, but also in levels of income and wealth inequality not seen since the immediate pre-Great-Depression 1920s."

The upshot of these two trends is that wage labor in developed countries is under continuing downward pressure. Whether the limpid economic recovery continues or not, the wage levels of the pre-crisis period will not return and those workers who earn wages for their performance will continue to experience lower real wages and thus a deteriorating standard of living.

What many still have not wanted to see is that the crisis itself was a response to these trends. For the last 20 years, the decreasing wages of workers in developed countries was hidden and compensated for by increasing debt, both private and public. As the report sees,

Easy access to consumer credit and credit-fueled rises in home values – themselves facilitated by recycled savings from emerging economies’ savings – worked to mask this widening inequality and support heightening personal consumption.

There is a chart in the report that itself shows the problem with crystal clarity. In Figure 2, we see that until 1982, the wages of workers and the income of non-wage earners (thus the higher-paid supervisory workers) was largely equal. Beginning in 1982, however, the earnings of non-wage earners began to rise significantly faster than the income of wage workers. This is at least one original source of the increasing inequality of the American populous and it is exacerbated by an increasingly less-progressive tax code and also by the increasingly profitability of capital investments in the global economy. As the report concludes,

Because many workers were no longer sharing the fruits of the economy’s impressive productivity gains, capital was able to claim a much larger share of the returns, further widening wealth and income inequality which by 2008 had reached levels not seen since the fateful year of 1928.

For anyone concerned with politics in the 21st century, understanding our current economic predicament is essential. That is why reading such a lucid report as this one from the New America Foundation is so important. It is, this weekend, your weekend read.

New America Foundation Article, The Way Forward

-RB

6Apr/120

Is Yonkers Next?

According to the NY Times and a report commissioned by the Mayor of Yonkers, that city may be the next municipality to trade democracy for a technocratic control board to control its finances. The key takeaway from the article:

In an interview, one of the report’s authors, former Assemblyman Richard Brodsky, said that the projected shortfalls would be too large for Yonkers to handle on its own and that other options would eventually have to be explored, including bankruptcy or a control board, unless the state bailed the city out.

The report itself is viewable here. In it, the Mayor of Yonkers embraces the report as “a dose of reality to our City.” He continues,

"I want to thank the Commission for bringing these challenges to light and exposing the truth. We now must come to the table and work together as a City to best figure out ways we can overcome these issues and prepare for the coming years.”

I give the mayor credit. Unlike other municipalities, he asked for the report rather than have it imposed upon him, and he seems genuinely desirous of figuring out a political solution to the crisis. But once again, the crisis seems so big (Yonker's annual shortfalls over the next four years are projected to be more than 10% of its annual budget) that political solutions appear almost impossible to reach. That may or may not be, but one thing is true:

“Nothing is more important than getting accurate information about long-term fiscal challenges as a way of ending the use of gimmicks to mask fiscal realities,” said former Lieutenant Governor Ravitch.

—RB

19Jan/121

Smart Guys on Wall Street

Nicholas Kristof asks the profound question today in his column: Is banking bad? He gives the equally enlightening answer: no. Only if you read down to the end of the column filled with such nuggets do you find the one truly revealing fact:

In 2007, on the eve of the financial crisis, 47 percent of Harvard's graduating class  headed for consulting firms and the financial sector — a huge misallocation of human capital.

In a NY Times op-ed essay in the midst of the financial crisis, Calvin Trillin presented the thesis that the origin of the financial crisis is that smart guys began working on Wall Street. There is no doubt truth to this and it goes hand in hand with the extraordinary rise of the entire financial and banking industries in the world. What needs to be seen, however, is that the reason smart guys have come to Wall Street is not simply because they wanted or needed that second ocean-faring yacht. Rather, it is that in an era of unbridled capitalism, self-worth and purpose are determined above all by one’s standing in the game of workplace success.

When all higher culture and spiritual values have been devalued, the one way that a person can secure meaning and sense to life is through the objective measurement of success that capitalism offers. In such a world, the pursuit of wealth, as Max Weber saw, is stripped of all need for spiritual justification, and emerges simply as a sport, a game in which not only the spoils, but also the sense of significance and wholeness, go to the winners.

-RB