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.