Wednesday, June 3, 2020

Virus Attacks Internal Organs of Empire

The State of the Science 

The state of the science for COVID 19 is embryonic and as a result most projections are little more than speculation. As yet, there is no consensus on what if any future immunity or temporary immunity those who have recovered from the virus will receive from what antibodies they might have. Timelines of 18 to 30 months for development of a vaccine assume some sustained immunity from the development to antibodies, but to date there is insufficient evidence to conclude whether COVID-19 has more in common with seasonal flues, for which vaccination works, or another coronavirus, the common cold for which there is no possibility of vaccination due to the inherent mutability of the virus.

This level of medical and scientific uncertainty combined with the demonstrated lethality of the virus argues strongly that “the precautionary principle” should be observed until such time as the narrow question of acquired immunity is reasonably answered. Taleb et al are worth quoting in full on this:
General Precautionary Principle : The general (non-naive) precautionary principle [3] delineates conditions where actions must be taken to reduce risk of ruin, and traditional cost-benefit analyses must not be used. These are ruin problems where, over time, exposure to tail events leads to a certain eventual extinction. While there is a very high probability for humanity surviving a single such event, over time, there is eventually zero probability of surviving repeated exposures to such events. While repeated risks can be taken by individuals with a limited life expectancy, ruin exposures must never be taken at the systemic and collective level. In technical terms, the precautionary principle applies when traditional statistical averages are invalid because risks are not ergodic.
Spreading rate : Historically based estimates of spreading rates for pandemics in general, and for the current one in particular, underestimate the rate of spread because of the rapid increases in transportation connectivity over recent years. This means that expectations of the extent of harm are underestimates both because events are inherently fat tailed, and because the tail is becoming fatter as connectivity increases. Global connectivity is at an all-time high, with China one of the most globally connected societies. Fundamentally, viral contagion events depend on the interaction of agents in physical space, and with the forward-looking uncertainty that novel outbreaks necessarily carry, reducing connectivity temporarily to slow flows of potentially contagious individuals is the only approach that is robust against misestimations in the properties of a virus or other pathogen.
Asymmetric Uncertainty : Properties of the virus that are uncertain will have substantial impact on whether policies implemented are effective. For instance, whether contagious asymptomatic carriers exist. These uncertainties make it unclear whether measures such as temperature screening at major ports will have the desired impact. Practically all the uncertainty tends to make the problem potentially worse, not better, as these processes are convex to uncertainty.
Conclusion : Standard individual-scale policy approaches such as isolation, contact tracing and monitoring are rapidly (computationally) overwhelmed in the face of mass infection, and thus also cannot be relied upon to stop a pandemic. Multiscale population approaches including drastically pruning contact networks using collective boundaries and social behavior change, and community self-monitoring, are essential. Together, these observations lead to the necessity of a precautionary approach to current and potential pandemic outbreaks that must include constraining mobility patterns in the early stages of an outbreak, especially when little is known about the true parameters of the pathogen.
It will cost something to reduce mobility in the short term, but to fail do so will eventually cost everything—if not from this event, then one in the future. Outbreaks are inevitable, but an appropriately precautionary response can mitigate systemic risk to the globe at large. But policy- and decision-makers must act swiftly and avoid the fallacy that to have an appropriate respect for uncertainty in the face of possible irreversible catastrophe amounts to “paranoia,” or the converse a belief that nothing can be done.

Taleb et al rely on “complex systems dynamic analysis,” which was first systematized by the authors of “The Limits of Growth” around the work of Nobel Prize philosopher and economist Fredrich Hayek. Its importance is that it looks at complex systems as radically dynamic where tipping points, once crossed, confer logarithmic, non-linear change. When “The Limits of Growth” was published the non-linearity of its conclusions were immediately challenged by William Nordhaus, another Nobel Prize economist, who’s arguments have been incorporated into the mainstream economics we now live with.  Nordhaus’ linearity ignores the real, nonlinear risks of disruptive events in dynamic systems like the earths ecology in the case of “The Limits of Growth” or extinction risks in the case of recurring global pandemics. This discounting of what Taleb calls fat tail risk by mainstream economists and scientists is what drove him to write his best-selling 2007 book, “The Black Swan”, anticipating of the 2008 Global Financial Crisis (GFC). Where Nordhaus and most economists using linear models to describe non-linear systems failed to see the largest financial crisis since the Great Depression until after the fact. Taleb wrote and sold his book into the collapse after anticipating it and its catastrophic effects. 

With the mortality seen to date and only somewhere between 5 and 50 million infected (world-wide as of this time of writing), the pandemic is clearly far from having worked its way through the population, which it will do. Even without a vaccination, medical science is likely to identify best practice treatments and ameliorative behaviors over the course of the coming several years. If/when evidence confirms or disproves the possibility of vaccination we will be able to narrow our planning horizons, until then we need to think in terms of real uncertainty rather that risk. Science is popping at the moment with best minds around the world fully engaged, so there is reason to hope that good news is immanent, but the present reality is that politics around the world are being driven more by flawed economic than real public health concerns.

It was the same William Nordhaus who pulled dynamic systems analysis out of the IPCC Reports on which world governments are basing their inaction on Climate Change. Nordhaus linear models project modest sea level increase and warming this century because his model is linear and excludes the “tipping points” complex systems analysis describes and that have logarithmic rather than linear impacts: fat tail risk. It is particularly discouraging that almost all economic models of COVID-19 are of the Nordhaus rather than Taleb variety and are systematically disregarding risks of non-linear, logarithmic outcomes of a known logarithmic system: viral infection with R0 of greater than 1. While medical science is carrying its own weight in the crisis, it will take time. The science of risk management is not pulling its weight because ergodic models are being applied to a non-ergodic system: life in a Darwinian universe where nature is indifferent to human survival.

The Crisis in Medicine:

The American for profit medical industry has demonstrated decisively in the last two month’s markets cannot deliver public health. Rather, profit is maximized at the expense or public health with individual deaths as one of the costs externalized to society. The consolidation of the medical industry has deliberately reduced the bed count in private hospitals while beds in public hospitals have been cut by local government as Federal and State support has subsided. The COVID-19 shut downs are adding pressure causing even more reductions. This has left Private Equity planning our COVID-19 response for profit, cutting front line responders pay during the height of the pandemic.

This is the result of 40 years of viewing “public goods” as a cost rather than investments. From defunding sanitariums for the mentally ill, who now mostly live on the streets or in prison, to the privatization and public subsidy of hospital and other health care facilities, even before the current pandemic, the American for profit and most expensive “health care” system in the world produced significantly worse health outcomes. Combined with the deregulation of capital and the offshoring of production, the Business School ethos of “just in time” management brought to public health by privatization has eliminated all spare capacity and any stockpiles of medical supplies like PPE or ventilators, viewing them as stranded capital to be liquidated to bolster current profits.

Public health is a non-ergodic system, there is no reason to assume health is self-equilibrating (ergodic), the history of plagues and pandemics is well known. But the analytical models of mainstream economics on which our politics have come to rely make no room for the absolute uncertainty of non-ergodic systems (life, biology). This is directly resulting in elevated mortality rates in States like New York where economizing on public health is resulting in extreme shortages of hospital beds, ICUs, ventilators and PPE. This economic rationalization of a non-economic system, public health, has made the actual New York system unfit for purpose, demonstrably unable to provision for public health in a predictable and predicted crisis.

There is more money to be made from shortages of PPE and pharmaceuticals than there is from stockpiling adequate supply. Our privatized “public health” system is effectively doing exactly that right now. Because the demand is highly irregular, there will be no incentive for private investment in the production of PPE or even vaccines without significant public subsidy. Even then, the business incentive will be to leave supplies somewhere short of projected demand as emergency production with incompetent government oversight will be more profitable.

Oversight of public expenditures on public goods, whether health, finance or war spending, was one of the core functions for the US Government from the beginning of the WW2 mobilization until the Reagan era of deregulation began. “Deregulation” can usefully be thought of as de-criminalization of “profiteering”, the making of unreasonable profits not justified by any risks taken, across the financial economy. The financialization of US medicine through the medical insurance industry has optimized for exactly this kind of profiteering, primarily through “upcoding” and “surprise billing”. Generally, wherever lack of government oversight allows exploitation of market power, the introduction of IT has resulted in the optimization of public expenditure for private profit rather than public health.

As demonstrated by the numerous countries who have managed to stop the pandemic, the public health disaster in The United States is a man-made disaster. As recently as February, the world considered the US CDC as the go to source for pandemic planning and it is the past recommendations of this agency that have structured the major successes elsewhere in the world. That the United States has lost the competence to execute on policies it has itself developed and trained governments around the world to adopt represents a systemic decay. It was made plain in March that the US is incapable of correcting course. This demonstrates that the privately run medical system, paid for by profit making insurance companies, is not a health system but a system of profiteering from illness and death. This has nothing to do with medical professionals and everything to do with systems designed to exploit rather than heal that deliberately subvert the efforts of healers.

The Crisis of Politics:

“The more laws and restrictions there are,
The poorer people become.
The sharper men’s weapons,
The more trouble in the land.
The more ingenious and clever men are,
The more strange things happen.
The more rules and regulations,
The more thieves and robbers.”​
Gia-Fu Feng and Jane English (Vintage Books, 1972)

If it weren’t so deadly, it’s so absurd it would be funny. With the exception of China, and its economic hinterlands, political responses to COVID-19 are being informed by economic models like that Nordhaus used in his critique of “The Limits of Growth”: linear and ergodic. Within the mineral and geophysical parameters of the earth, life might be thought of as a self-equilibrating, as ergodic, but as an isolated biome, part of a larger Darwinian process, human life certainly isn’t self-equilibrating: species go extinct all the time. Such wholly unfounded ergodic assumptions blinded economists as a profession to the systemically obvious GCF in 2008. Ergodic DSGE and IS-LM economic models failed to account for debt dynamics which are actually carefully tracked and published by bank regulators. Western politicians who are being systematically misinformed by their economic advisors are visibly making a difficult situation worse, as they have for the last decade, letting all the same risks that drove the 2008 crash flourish. This time, however, the virus burst the bubble rather than the usual “animal spirits”.

With biological and psychological factors as the main exogenous shocks it’s reasonable to expect the worst from a political system structured to address economic problems as though the only variable was “the price of money”, thus solely through monetary stimulus. The virus doesn’t have an account with the Fed. I’ll return to this below in The Economic Crisis, but understanding the ubiquity of misinformation in contemporary economics is essential to understanding what the policy responses will be and why they will fail. The reliance of the West on ergodic economic forecasting models will be the first casualty of “the end of American Exceptionalism”. It will be important to follow policies and outcomes abroad in order to understand in the next few years what actually works when it becomes obvious the American system is fundamentally broken. As Gramsci said, “the crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great number of morbid symptoms appear.” Politically and economically, what we are living through is epochal, an era is ending and another one beginning. What follows is an outline of structural changes in US politics over the last half century leading to the current tipping point.

Domestically, in the 1976 Buckley vs Valeo ruling, the US Supreme Court decided that political bribery was Constitutionally protected free speech. Always and everywhere corruption has haunted the halls of politics, but the 1976 ruling set the foundation for an incipient political market-place, an actual incorporation of corruption into formal politics. This judgement set terms under which it would hence forth be legal to bribe politicians. So long as it was open ended (without written quid pro quos) and confined to politics (nominally campaigning), specific amounts and forms and terms of payment were legally codified creating a highly regulated market-place. These rules have subsequently evolved and loosened as legislated by Congress and bracketed by subsequent rulings of the Court. The process culminated with Citizens United which determined that anyone with money, including recently re-created corporate persons, has a barely limited right to spend whatever they choose under loose and hardly enforced rules. You and I are free to bribe under these rules too, but corporate personhood clearly privileges concentrated wealth, so our miniscule sums will be wasted. In this market, US politicians have become quite adept at the solicitation of bribes and the provisioning of those who bribe them.

As this market-place evolved, it became easier and easier for well-funded entities to encourage lawmakers to favor their interests in legislation. The Finance, Insurance & Real Estate (FIRE) industries were early to the opportunity, one uniquely available to those who could literally create money. Financial criminals were prosecuted in mass for last time under a Republican administration for the frauds leading up to the Savings & Loan collapse. Hundreds of executives went to jail. Finance flipped allegiance in the subsequent election, hiring Democrats instead of Republicans. Just as Buckley vs Valeo, under a Democratic administration began the development of a political market-place defined through minor legislation and court rulings, the Republican administrations of the eighties began the deregulation that led to the S&L and subsequent busts. The following Democratic one completed de-criminalization by repealing Glass Steagall and dismantling the regulatory apparatus that prevented the Wall Street casino from gambling with the savings of retail bank customers, frauds that had led to the 1929 collapse. This led within several years to the bubble and within a decade to the 2008 GFC with massive public bailouts for which no one of importance was prosecuted despite rampant, now legal, fraud, nor were any of the bailed out bank managements even fired.

While FIRE led the way down the road of decriminalization, the Military Industrial Complex and associated oil industry were precocious students. By the time Eisenhower coined the term, the MIC was already distributed across all fifty states to ensure political access. With its ever-expanding budget, the Pentagon has developed a private political presence of contractors and their employees who bribe congressmen on its behalf to add to its public power. By the final years of the century, the MIC was as fully engaged in fraud as finance, and with equal impunity. Learning from these role models, as the new century dawned, every powerful public agency or private business was lining up to bribe legislators at all levels of government to similarly re-legislate the legal environment in which it operated. The Patriot Act disburdened Federal Agencies like the FBI, CIA and NSA of most oversight and a sympathetic Executive Branch essentially abdicated on oversight so long as these agencies supported its policies. The largest anti-war protest in world history, over 36M people, provided no brake on the US march to war on falsified information from the newly deregulated intelligence agencies. Multiple aimless wars and the crafted hysteria of terrorism covered politically for the liberation of the most destructive and exploitative public and private institutions from electoral oversight and control. These agencies were empowered with surveillance and extrajudicial punitive powers clearly at odds with any honest reading of US constitutional law. Similarly private corporations generally were given an operational right to ignore whatever laws they found inconvenient.

There are no individuals in the above account because the political crisis the United States faces is an institutional one. The current crisis is the result of the institutional changes outlined above, not a cause. The 2008 elections in which Americans dramatically repudiated everything to this point in my narrative resulted in a Democratic administration institutionalizing everything the electorate put it in office to end: no one was prosecuted for falsifying intelligence to coerce the public into supporting a series of wars who’s only point is private profits; no one was prosecuted for torturing prisoners; no one was prosecuted for extrajudicial executions; no one was prosecuted for systemic financial frauds. In fact, after bailing out Wall Street with $29T, the government then “foamed the runway” with homeowners, foreclosing on and bankrupting millions to buy time for private banks to pad their balance sheets with free money from the Fed via Quantitative Easing. All while the Wall Street gamblers who created the problem not only kept their jobs and got their bonuses but went right back to business, scarcely changed.

Similarly this political narrative excludes all the headline political stories of the last several decades: abortion; immigration; illegal immigration; gun rights; church and state; mass shootings; Russia; North Korea; Me Too; etc. etc.. Instead it follows a chthonic narrative of bipartisan consensus about freeing business, more properly money, from political and legal constraints and shifting the locus of governmental support from the population in general to private businesses and property, benefits limited to the extent possible to the “market makers” of politics: the bribers. The 80s, 90s & early 00s established this new system, from the late 00s it has been playing itself out. The presentation of polarized politics to the public through corporate owned media has been a distraction from the auction block politics has become where legislators compete in the solicitation of bribes to serve the interest of the bribers until they lose an election at which point they become lobbyists for the bribers they’ve already served, this their reward for betraying their electorate. The dysfunction we are living is the result of disparate policies bought by disparate interests that cannot be coordinated in a crisis by design because any public good established through such coordination would cost some interest its profits.

For instance, half way though the previous Democratic administration, deregulation of pharmaceuticals led to an opioid epidemic causing a sustained US life expectancy decline for the first time in almost a century. The legislative response has been non-existent. Further, this deregulation created a replicability crisis in science as primary research was privatized for profit. The result has been a growing mistrust of science that dovetails politically with the disinformation campaign against climate scientists deployed for the last 40 years by the oil industry which hobbles the effectiveness of well-known epidemiological practice in the ongoing pandemic. The political right has used the real corruption of science to delegitimize policies directed towards public goods from climate change to pollution control to epidemiological responses, supporting a profitable status quo for themselves. Furthering the illegitimacy of expertise, the college admissions scandal has made a narrative of generalized elite corruption easily believable and apparently real.

The Democrats persistent denigration of working people, efforts to define them as racists or gun nuts, and the lived experience of betrayal in 2008 followed by abandonment has left voters deeply skeptical of the Democratic Party. This abandonment is so obvious to those who’ve experienced it that Democrat controlled corporate media are discovering their attacks on the Republican incumbent enhance his chances of reelection even as he defies sound or even sane practice in the pandemic. Democratic association with the Intelligence Community further erodes the legitimacy of the Party through the obvious lack of competence over two generations of this fourth, clandestine and now wholly unaccountable branch of government. 

Privatized medical institutions have proven they cannot provide for public health. Congress has proven incapable of serving any but the most modest public goods, legislating bailout after bailout for bribers while giving lip service to working people by calling them heroes in legislation that essentially ignores them. The executive promotes his investments while fumbling his powers to coordinate public policy for public good even as the daily death rate grows into his “reopening the economy”. The party of War and Oil wants to reopen the economy because shutdowns impede action, commerce, consumption and profit. The Party of the Finance and the Medical Industrial Complex wants to reopen the economy, but allow the PMC (who form their voting constituency, the Professional & Managerial Class) to work from home while requiring blue collar workers to shoulder all the health and financial risks for the same reasons. The galling hypocrisy of allowing those who can afford to work from home to do so while requiring those who can’t to face infection and unknowable risk isn’t lost on workers. We are half way through an election year and for their own parochial reasons both Parties would rather have more working people die than do anything meaningful to help them. Working people and Disaster Capitalists are both taking note.

Abroad, as time has passed US foreign policy has been increasingly malignant. With the death of Roosevelt the vision of a popularly constrained capitalism where markets were focused on the overall needs of society was abandoned. Instead, under the new global dollar standard set up at Bretton Woods, the US embarked on a “free trade” project modeled on the British Empire now controlled by the US, which when combined with Monroe Doctrine trade relationships in the western hemisphere was more or less coterminous with the American sphere of influence. As the war was winding down the State Department, Pentagon and OSS, soon to become the CIA, began a sustained campaign of expansion by regime change aimed at economic assimilation of both populations and material resources to expand the dollar empire. That campaign continues to this day. The goal has been to re-build and extend the laissez-faire capitalism that existed prior to the First World War where metropolitan capitalist centers benefited from minimally constrained exploitation of populations and resources remote from them, assigned fixed roles in a global “division of labor” policed now by the US military and/or clandestine agencies.

Laissez-faire posited that the global division of labor would produce the best global economic outcomes, claiming the many would benefit from the profits of the few. An ideology that had grown up with capitalism, laissez-faire economics was a supposedly apolitical logic. In fact it was and is a rhetoric used to hide the raw power of concentrated finance. Power to bend small and distributed political institutions to the will of those who wield capital. Under this ideological rhetoric, any sincere pursuit of freedom applies solely to freedoms of capital and the freedoms of those individuals that command it. Since the early 19th Century, laissez-faire capitalism has been disguising its aim of a centrally planned, privately owned, maximally exploitative economic system behind a popular rhetoric of freedom, deliberately confusing human freedom rhetorically with that of capitalist institutions of control. Post war US foreign policy has been as pure an expression of globalist, laissez-faire goals as capital could afford and nominally popular politics could sell.

US clandestine agencies, and the State Department and Pentagon to varying degrees, have been involved in non-stop regime change efforts towards the global integration of populations and resources in this system of private, capitalist control. Mostly successful since WWII, these efforts began with Greece in 1948, followed by Syria in 49, Albania from 49-53, Iran in 53, 54 Guatemala, Syria again in 56, Haiti in 57, Indonesia 57, Laos 58-60, Cuba 59-present, 59 Cambodia, 60 Ecuador, 60 Congo, 61 Dominican Republic, 62-64 Brazil, 63 Iraq, 63 South Vietnam, 64 Bolivia and Brazil, 65 France, 65 Indonesia again, 66 Ghana, 67 Greece again, 70 Costa Rica, 71 Bolivia again, 73-75 Australia, 73 Chile, 74 Portugal, 75 Angola, 75 Zaire, 76 Argentina, 76 Jamaica, 79-89 Afghanistan, 79 Seychelles, 80-92 Angola again, 80-89 Libya, 81-87 Nicaragua, 82 Chad, 83 Grenada, 82-84 South Yemen, 82-84 Suriname, 87 Fiji, 89 Panama, 91 Albania again, 91 Iraq, 93 Somalia, 99-2000 Yugoslavia, 2000 Ecuador again, 01 Afghanistan again, 02 Venezuela, 03 Iraq again, 04 Haiti again, 07 to present Somalia again, 11 Libya again, 12 to present Syria for a third time, 14 Ukraine, Brazil again in 16 and Bolivia and Ecuador in 2018. Ongoing destabilization efforts are underway in Venezuela, Iran, Russia and China.

In addition to Cuba, the countries in the last sentence represent “the resistance” to assimilation in the dollar denominated global financial empire. The US has essentially surrounded these countries with military bases. The last two administrations have been structurally hostile towards China with the current one ramping up the “regime change” rhetoric both to pursue ongoing policy and to distract from systemic domestic failures in handling COVID-19. Hostility toward Iran has been a sustained US trope since the 79 overthrow of the US puppet Shah and Venezuela since Hugo Chaves established a popular government there in 1999. Russia was a brief success for the CIA when Yeltsin militarily suppressed the newly installed popular government there in 1993 but Putin has become a stubborn spoiler, depriving the global division of labor the vast resources of the Russian east.

When States, territories and/or populations are assimilated into the US financial empire, they are integrated into the global division of labor where the private multinational capitalist actors who can most profitably utilize these choose for them. To the extent local populations or States object they become subject to police operations sponsored by US military and secret agencies. The major refugee/immigration crisis of the last two decades can be traced directly to these policies. Transfer pricing by multinationals, where they internally transfer accounts across borders to avoid taxes, has resulted in a global “offshore banking” archipelago where profits from that global division of labor, policed on the US taxpayers account, are sequestered ahead of exposure to taxing authorities. This is the clearest manifestation of the American Empire, where nominally independent nations around the world cannot pursue policies for the benefit of their majority populations while wealth is stripped from them and hidden in financial havens within the US empire but outside of US taxing authority, and thus of no benefit to most Americans who see only the costs.  These populations serve multinational capitalism as cheap, disposable labor that can be kept at subsistence living standards while producing robust profits for foreign investors who additionally benefit from US military and police protection without having to pay for it.

Begun with The Marshall Plan, this monetary imperialism, a uniquely American approach to empire, has grown to dominate two thirds of the earths human population and most of its surface area, but mismanagement had it experiencing overreach even prior to the pandemic. Geopolitical tensions between core US allies in Europe, Asia, Africa and Australia and the imperial centers in New York and DC suggest a quickly shifting future. Germany is committing to deeper integration with Russia in the energy market as Japan, South Korea, Taiwan and the Philippines look at a future without their US protectorate status, where not actually remilitarizing. The centrality of the US Federal Reserve is the only real force holding this monetary empire together even as competing economic and geopolitical interest build structures to tear it apart.

Domestically US politics has been reduced to a policy auction house where whoever bids the highest gets whatever they want without any coordination of public needs, or even internal coherency. Capital and IT began to buy up the electoral process following the Judicial Coup in 2000. This has led directly to the legitimacy issues of the last two Democratic Party Primaires, destroying the credibility of the Democrats as a "popular party". The monetary empire seeks and has acquired a state that is small and weak with regard to individual political and economic rights, but as large and powerful as necessary to protect private property and other economic rights of those who control capital. What the collective of competing buyers have acquired is a communism for the rich, but one that is liquidating its own economic basis in real production. This will be the subject of the next post.

The global policy of the post war empire has been brought home. Beginning in the 70s, concluding now, the forces that generated civil war and population displacement around the world for the last 70 years are having the same effect in the US. An unfit for purpose “health care industry” has needlessly killed a hundred thousand people in the last three months while an unfit for purpose financial industry has again been given an essentially open ended bailout. These outrages while well over 40 million have lost their jobs, income and, unless they can pay out of pocket, their health care. All of the wounds of US foreign policy continue to fester even as political incompetence destabilizes the central economic dependencies around which the US world financial empire is built. And this "bringing the empire home" has brought with it the police state normalized 70 years ago for the beneficiaries of “regime change”. The level of freedom in a society is best expressed by how it treats its most hated political prisoners. Ours has shown it character with psychological warfare against Assange, physical torture of Manning and the expatriation of Snowden, that character is now on public display across the nation. 

In the next post, we will look at the economic consequences of the pandemic on the uniquely financial imperialism of the US centered global economic system. This is a system that has used debt obligations as it's primary projection of power, with the US armed forces an increasingly ineffectual subsidiary. As the virus has attacked every imaginable link in the "chain of payments" structuring this empire, economics will become the driver of politics until the system collapses or re-introduces a robust conception of public goods.

“Everything under heaven is in utter chaos, the situation is excellent.” Mao Zedong

Monday, April 6, 2020

The Economic Death Cult & Corona Virus

The last several months have been a real astringent for world political economy. If we can stay clear headed and identify the various fulcrum points the shifting disintegration of our political economy is uncovering, there will be numerous opportunities to have disproportionate effects. These effects may not turn out as we intend, but we should least try to change for the good. Toward that aim, I'll begin by laying out the core values the following analysis is based on, the "good" I see to aim for: that anthropogenic climate change is real and manageable; that neoliberal capitalism is converting invaluable global genetic, ecological, biological, organic and chemical/mineral resources to money profits now by destroying those resources for the future and that this can be changed; that western political systems have been captured by neoliberal capitalists and that this can be changed; that neoliberal capitalists, while they may be decent human beings individually, lack the moral imagination to accept the responsibility for the wreckage and carnage their "investments" reap, it remains possible that this too can be changed.  

What has become surprisingly obvious in the last few weeks, so obvious even our President's beginning to see it (but not so obvious that economists, the clerics of the neoliberal state, can see it), is that The Efficient Markets Hypothesis has turned Western economics into a death cult. Nobel laureate economist Paul Samuelson's so called "Keynesian Synthesis" normalized The Efficient Markets Hypothesis (EMH), deceptively relegating Keynes "animal spirits", his contention that tempers and temperaments of fickle humans animate markets, to short-term epiphenomenon. Instead Samuelson elevated an empirically untestable claim to the status of unassailable truth: that market agents with perfect informtion settle market prices that are self-equilibrating. Unassailable, that is, between markets collapse like two weeks and twelve years ago. Between such events, when the "Market" doctrine has held, the logic of EMH has been used to rationalize the elimination of all "costs" that would be necessary to maintain a societies ability to combat, for instance and among other things, a global viral pandemic. It is the EMH logic that has had our President insisting we'll all head back to work after Easter, it's sure as hell not concern for our health.

This astonishing video leads me to believe that our President has a better grasp of what money is (a social/political relationship) than anyone in the Democratic Party, and that to save his Presidency there is a better than even chance he'll steal Sanders "Medicare for All", which the Democratic Party has thrown everything it has into defeating (yielding a candidate with obvious dementia to challenge Trump in the fall). At a fraction of the cost of the $6T bailout Trump's discussing here, he can temporarily nationalize the medical insurance industry and provide universal medical coverage at least for the duration of the crisis. If he wants to get his face on Mount Rushmore, he'll consolidate it into universal government backed insurance like Germany has and go a long way towards making US labor costs globally competitive again. But I expect rather that he will maintain a predatory rentier system once the virus has passed to placate the oligarchy, a universal insurance system with poison pills to ensure shareholders get their dividends from disease. Even this, though, would be a profound re-alignment of US social relationships to the benefit of workers. If the Democrats are lucky, he won't seize this opportunity but the death cult of economic expertise makes their luck our misfortune.

Different from the Global Financial Crisis of twelve years ago, the lethality of the present one is glaring. The previous episode erupted around the social relationships we think of as "debt". As such, it could be dealt with through the power of fiat money by a Federal Reserve desperate to prevent people questioning the social nature of those underlying relations in order to preserve the relations themselves. 

In only this The Fed succeeded. 

In 2008 it was predatory lending and regulatory failures of the global dollar banking system that precipitated the crisis. A crisis of debt that only turned into a social one when Western governments insisted on maintaining the underlying debt structure by forcing societies to pay for the mistakes of finance. The tragedy of Greece was the clearest EU manifestation, though Cypress, the Baltic states, Ireland and Spain were all abused. The worst of it in the US was the foreclosure epidemic of 2008-12 where poor and minority homeowners were used to "foam the runway" for a slow-motion recapitalization of otherwise insolvent US banks. The lethality of the GFC is visible only in the statistics of suicide and the "deaths of despair" of the opioid epidemic, which the unaffected tend to be unaware of. The current crisis is one of disease itself intruding on the socially agreed fictions of money with very real fears for life and health, animal spirits dislocating the structure of debt. The bodies are piling up in the morgues even as the defaults pile up on bank balance sheets. 

I'll return to the underlying structural forces at work in a latter post, but explaining them will be much easier in light of the clarifying realities COVID 19 continues to force into the social relations of money, debt and power. Probably the most immediate problem is the one who's name I'll borrow from "Slate", Red April: Mattress Firm, Subway and Cheesecake Factory, among other corporate franchises are lawyering up to engage in a rent strike. The precedent set here implicates about $40B a month in the residential rental market alone, which disruption in the flow of funds could trigger cascading defaults across the financial and real estate industries here and around the world. This impending threat has neoliberal institutions like the Financial Times trotting out "Fear, Uncertainty & Doubt", the anti-marketing technique perfected first by tobacco and now used primarily by fossil fuels companies to confuse otherwise clear science to protect threatened profit flows.

From the perspective of the social relations of money/debt, that it is these corporate franchise chains lawyering up to prepare for a rent strike says that we have arrived at the logical conclusion of the Citizens United vs FEC ruling. Corporations are now fully enfranchised and acting as citizens. Except to the extent they are as wealthy as corporations, actual humans no longer matter and cannot get traction as citizens. The CARES Act provides about two trillion dollars in subsidies for corporations and wealthy investors plus another four trillion for financiers while only providing a window dressing of unemployment relief and financial aid to distressed Americans. Conspicuously absent in light of Sanders campaign for "Medicare for All" is any effort to help Americans defray the costs of testing and treatment for the virus itself, and whatever losses medical insurers take from those who's insurance does actually cover them, insurers are confident they will recoup next year by raising rates 40% or more as the need may be. I'm afraid Trump has noticed this too.

As for the citizens abandoned by their government, the Federal Reserve recently projected that 10-15% of Americans cannot muster $400 to handle an emergency. It is probably not that 10-15% who showed up in the unprecedented 3,283,000 new unemployment claims booked the week ending March 20th, before the systematic shutdowns began to roll across America's cities: gig, part-time and contract workers don't qualify for unemployment while living under the highest levels of financial stress, making the real situation much worse than even the appalling headline number. Millions more have filed for unemployment in the time since then. While the unemployment number is ten times the previous record for new claims, a record set tellingly in 1982 as the "Markets" ideology was initially deployed to begin to dismantle the New Deal social protections, it excludes anyone who didn't previously have a full time job with benefits, which is to say all of societies neediest. The $1,200 in payments to individuals included in the CARE Act is an insult to the ongoing needs of a huge number of hard working, underpaid and increasingly insolvent Americans. It can't even reach the tens of millions of people who have no bank account and so don't exist to the IRS.

Many of these people will have no choice but to join the Red April rent strike: no money no rent. The S&P bounced after the CARE Act passed, but within a day investors began to worry about the upcoming first of the month and are watching nervously as the realities set in. Between the $29T financial bailout in 2008, the ever expanding Fed Balance sheet resulting from Quantitative Easing and new innovations in pumping money into the financial infrastructure to keep it from blowing up, not to mention the cost of the permanent wars, it's pretty clear the US can afford what it chooses to afford. That the President, and numerous others, nominally liberal and conservative, were calling on workers to go back to work by Easter despite projections the pandemic won't peak until mid-May tell you all you need to know about their values: they value their balance sheets. New Zealand and Italy have both backed their populations in response to the crisis with direct financial relief, thus far the US has told workers to "go die". It was only as the bodies piled up in New York that this Market first rhetoric abated just a little.

So, in the immediate term, for white collar workers as part of what is essentially a white collar quarantine their work can advance remotely and their direct deposit continue. In New York and DC there is likely to be a plethora of new opportunities headed their way as Cuomo jockeys to displace Biden from the head of the Democratic ticket at what will certainly be a brokered convention this summer and the bailouts spill out across Maryland and Virginia. Looking a little further afield, China offers some interesting insights. The CCP deployed it's full authoritarian power, once it woke up to the problem, to effectively contain the epidemic. Of course I remain deeply skeptical of China's claims about success with the virus, I expect leadership there is subject to the same "save the economy, the people be damned" pressure the business and conservative press is subjecting ours too. None the less, once the quarantine was wound down, real fiscal stimulus is being implemented. This will have to happen here too and will require additional emergency legislation in the coming week. I expect governors and mayors across the country to start making a lot of noise in the coming week.

On top of the problems of the real economy and much like the PRC, in this increasingly panicked legislation we will feel the effects of an economic elite that acts with impunity in a political environment of scarce and incompetent oversight. New digital monopolies like Facebook and Google, distributional monopolies like Walmart and Amazon and innovative, high tech grifts like Tesla, Uber and to a lesser extent the quickly deflating WeWork are led by celebrity billionaires our post Citizens United Federal Judiciary and Justice Department will not touch. Combined with the mercenary essence of our two current parties, the GOP serving fossil fuels and resource extraction corporations, for whom Trump has shut down the EPA, the Democrats hosting the twin MICs, Military and Medical, furiously resisting attempts to end wars or solve medical problems, our domestic politics promise to continue the kind of disgusting giveaways to the rich and powerful we saw with the CARES Act last week. While we have surveillance capabilities to match the PRC, ours are all tooled to rent extraction and can't even be repurposed for public good in the biggest crisis in a lifetime.

And at the bottom, in a country that has more or less abandoned legal unionization, wild cat strikes like the Teachers Strikes last summer are proliferating. Nurses, truck drivers, bus drivers and longshoremen have, in various places across the country and without formal unions staged strikes for safe working conditions and material support. Prior to the Teacher Strikes, which incidentally were in "red" states, this was unprecedented in the last 30 years. Ennobled and appropriately emboldened as "essential workers", laborers across the economy and its supply chains are waking up to their power. While I expect the essential lawlessness of the corporate and plutocratic actors in DC for the foreseeable future, I expect more and more people will begin paying attention to the cognitive dissonance between what corporate media tell them and sources closer to them, at both the top and the bottom of society. 

Several generations of younger Americans have now grown up in a society in which nothing really works for them. Education has been monetized with the yield of profits more important than pedagogical results. Medical care is behind increasingly tall pay walls that everyone below the upper middle class is increasingly resigned to not relying on. Even science has a replicability crisis where monetary incentives have driven data selection and presentation for so long that the scientific method itself is breaking down. The people who have grown up with this dysfunction are significantly more open to non-Market solutions, a condition not seen since the 1960s, and Socialism, an openness not seen since Eugene Debs resigned from the Wilson Administration at the start of the First World War. To these citizens, the New York Times and Washington Post begin to look like Fox News looked to the once great papers audiences a generation ago: backward looking institutions trying to hold onto a no longer viable system while waiting for their audience to die.

In conservative media as well there is a split between what I'll call "values" conservativism, as embodied by journalists like Larison and Dherer at The American Conservative, and "power" conservatives like the editors at the Wall Street Journal. As with the left / liberal split amongst Democrats, this value / power split in the GOP opens real space for new political alliances and the potential of both parties to splinter. Interestingly, the Financial Times ran an editorial calling for redistribution, worker and environmental protections and significant government involvement in the economy. The editors finish by calling for a renewal of the "social contract" in Great Brittan. In the US, I would say at this point it would be to introduce a social contract at all: what's left of the one that used to exist here has been completely monetized in the name of efficiency by the Neoliberal Death Cult. 

Thursday, March 12, 2020

Neoliberal Collapse

"The West" is in the process of demonstrating that it no longer exists. We are living through an astonishing period in which infrastructure after infrastructure is being shown to have been privatized and then monetized, which is to say the Public Good component has been liquidated, converted to private financial wealth and thus no longer operational. A great portion of the world's population now finds itself at the mercy of mercenary, amoral Western Oligarchs and Plutocrats who have dimantled the State to empower themselves with sociopathic disregard for those things they cannot themselves provide. A coordinated response to a Public Health crisis, or airliners that don’t spontaneously nosedive for instance.

COVID-19 has exposed the core value of Neoliberalism: money is all that matters, life without it is worthless. No exceptions, if you're a new born, a superannuated war hero or the inventor of a vaccine that has saved billions of lives, if you don't have money you don't deserve to live. Our Oligarch in Chief went on television to announce that trade and travel with Europe would be blocked for a month due to the coronavirus and that testing and treatment charges would be waived for Americans who fear they may be infected. Homeland security latter clarified that, in fact, trade would not be blocked and if you want to get to Europe you can fly through the not so United Kingdom. The main US medical insurance trade group clarified that while testing would be covered at no expense to patients, any treatment would be subject to copays and no doubt surprise billing. The US has proven incapable of making test kits available in anthing but desultory quantities. For the Neoliberals in charge, if you can't afford medical care they'd like for you to know what's making you sick once you are sick so that you can go die quietly somewhere without infecting them, but preventive testing would be a crime against the market: sickness is the demand that drives it! Public Health wasn't worth a moment's thought until your disease put them at risk. Of course if you want treatment you will need to pawn you future.

The response from Congressional Democrats is nearly as vile, they have passed a bill that will temporarily fund payed sick leave and unemployment insurance for everyone who doesn't have them (and doesn’t work for a company with more than 50 employees, Walmart & McDonald's staff are still on their own) just through the pandemic. This rather than permanently legislating them as a human right and Public Good like any first world country: everyone knows that Medicare for All cannot be made law. Apparently the Democrats are concerned about the untreated adding to the already huge homeless populations in all the major Democratic strong hold cities, Team Blue is not offering any relief on copays, insurance premiums or surprise billing but does think in a pandemic thier servants should stay home rather than coming anywhere near.  This concern will pass with the crisis: Public Health is immaterial to Neoliberalism, private profits must be maintained particularly when a global pandemic affords opportunity for “surge pricing". So, from both Parties, it's "your money or your life."

Public health? Privatized.

A particularly awkward time for the Democrats to have to address this issue as they have just rigged every caucus and primary to ensure that Sanders, who has been pushing for medical care as a human right for years, doesn't become their nominee.  In litigation following an assortment of frauds in the 2016 Democratic Primaries, Party officials stated the Party is a private club that can do whatever it wants whenever it wants with rules and procedures, a fact in evidence with the last minute introduction of the APP in Iowa that made votes uncountable, confusing the outcome and stealing late votes and momentum from Sanders. Then, Bloomberg entered the race and the requirement for "campaign contributions" above a certain threshold to participate in the debates suddenly vanished. That all candidates with "delegates" qualified for the next debate suddenly no longer applied when Tulsi Gabbard unexpectedly got some.

The Democratic Party has become a toy of the Intelligence Community, the twin MICs (Medical and Military), and the Professional Managerial Class (PMC) who all desperately want a reliable subordinate in the White House to handle PR. The self-funding Sanders campaign is the biggest threat these constituencies see as his vast number of small donors have wildly different interests from the corporate and Permanent State functionaries who control the Party. The Republican Party is the unselfconscious Party of the Oligarchs after Trump’s hostile take over four years ago and the Democrats are now demonstrating themselves to be the Party of Permanent War, Universal Surveillance and profits before Public Health. The PMC's desperation for a more respectable face in the White House is not because they want to change how things are run, after all, they are running things, its' that incumbent incompetence has revealed that the PMC itself has set up "Health Care" as a system to encourage the poor to become sick so that the Medical Industrial Complex can profit from their illness. Congress represents corporations who see citizens as cash cows.

Political representation? Privatized.

Sovereign once in its borders and its people, now, when the Oligarch in Chief accuses China of infecting the world with the pandemic embarrassing his government, he is insulting the people from which we acquire most of our essential medical products, from face masks and gloves to antibiotics and other pharmaceuticals. This is the sad result of the CEOs and MBAs, the leadership cadre of the PMC who form the core constituency of the Democratic Party, having realized that resilience, a Public Good, could be monetized by maximizing industry concentration and the “global division of labor”, the latter a euphemism for the race to the bottom. This race is in pursuit of the most exploitable labor, land, ecology, whatever to maximize the money returns to capital while dislocating to remote locations and unseen people the starvation, misery, ecological destruction, atmospheric pollution etc. from which profits derive. This monetization of unseen devastation has driven Western “Globalization” and it is arriving at it’s endgame.

Sovereignty? Privatized.

China, today, offered medical assistance to Italy while the US treated Italy as a threat and the EU ignored her request to activate the EU Mechanism for Civil Protection. Russia has told OPEC to grow up, collapsing the price of oil. This will in a matter of weeks plunge the US Southwest and particularly Texas into recession as the fracking industry collapses. In turn, that means the US will have to ramp up imports of oil and gas, putting downward pressure on the dollar at the same moment the financial markets are plunging as a result of the cash flow displacements emanating from various COVID related quarantines, lock downs travel bans etc. These cash flow displacements promise to blow up the teetering inverted pyramids of debt QE has imposed on the financial sector across the West for the last decade. All the fraud propped up by a decade of global Central Bank financial transfers to the rich stand to unwind.

We have become a menagerie of squabbling Oligarchs, enabled by a begging coterie meretricious meritocrats haggling over privileges, trampling a dance floor built of the bodies of American workers, living, dying and dead. A nation that sees it’s people as an extractive resource until they become an unnecessary cost will not stay a nation for long. An empire built on pure economic exploitation, the Neoliberal retooling of what we once called “The West”, will rot from it’s deadest organs first, in this case its head. The scale of catastrophe will be determined by how long it takes for someone with some holistic understanding of Political Economy to step in and restructure what remains salvageable.

It’s a disgrace to be hoping for an American Putin to step in stop to the free fall, but this is likely the best “The West” can hope for.