Trade-offs between inequality, productivity, and employment

In economically polarized societies, this dynamic breaks down. The very wealthy don’t employ everybody, because the marginal consumption value of a new hire falls below the insurance value of retaining wealth.

.. Idle unemployment is a problem in societies that are highly productive but very unequal. Here basic goods (food, clothing) can be produced efficiently by the wealthy via capital-intensive production processes. The poor do not employ one another, because the necessities they require are produced and sold so cheaply by the rich.

.. The rich produce and “get richer”, but often they don’t much feel richer. They feel like they are running in place, competing desperately to provide all the world’s goods and services in order to match their neighbors’ hoard of financial claims. However many claims they collectively earn, individually they remain locked in a zero-sum competition among peers that leaves most of them forever insecure.

.. In relatively equal, technologically advanced societies, people create plenty of demand for one another’s services. But when productivity and inequality are combined, we get a highly productive elite that cannot provide adequate employment, and a mass of people who preserve more value by remaining idle and cutting consumption than by attempting low-productivity work. (See “rentism” in Peter Frase’s amazing Four Futures.)

..  We had a kind of Wile E. Coyote moment in 2008, when, collectively, we could no longer deny that much of the debt the “middle class” was generating to fund purchases was, um, iffy. So long as the middle class could borrow, the “masses” could simultaneously pay high-productivity insiders for efficiently produced core goods and pay one another for yoga classes. If you didn’t look at incomes or balance sheets, but only at consumption, we appeared to have a growing middle class economy.

.. As polities, we have to trade-off extra consumption by the poor against a loss of insurance for the rich.

.. If we want to maximize total output, we have to compress the wealth distribution. If inequality continues to grow (and we don’t reinvent some means of fudging unpayable claims), both real output and employment will continue to fall as the poor can serve one another only inefficiently, and the rich won’t deploy their capital to efficiently produce for nothing

.. Why did World War II, one of the most destructive events in the history of world, engender an era of near-full employment and broad-based prosperity, both in the US where capital and infrastructure were mostly preserved, and in Europe where resources were obliterated?

.. I think an underrated factor is the degree to which the war “reset” the inequalities that had developed over prior decades. Suddenly nearly everyone was poor in much of Europe. In the US, income inequality declined during the war. Military pay and the GI Bill and rationing and war bonds helped shore up the broad public’s balance sheet, reducing indebtedness and overall wealth dispersion.

.. The financial effect of the war, in terms of the distribution of claims in the US, was not very different from what would occur under Keen’s jubilee.

.. Although in a narrow sense, the very wealthy lost some insurance against zero-sum scarcities, the post-war boom made such scarcities less likely. It’s not clear, on net (in the US), that even the very wealthy were “losers”. A priori, it would have been difficult to persuade wealthy people that a loss of relative advantage would be made up after the war by a gain in absolute circumstance for everyone. There is no guarantee, if we tried the jubilee without the gigantic war, that a rising tide would lift even shrinking yachts. But it might very well.

Exiting the Iran deal is a blow to financial transparency and US control

the West’s dominance of global finance has meant that the US effectively controls conduits which are the lifeblood of non-Western powers like Russia and China as well. Russia, itself bitterly subject to American sanctions, hopes to escape the noose by deploying a blockchain-based parallel infrastructure for international transactions. Whether such an enterprise will prove laughable and quixotic, or whether it might pierce meaningful holes in the US-dominated conventional system, depends a great deal on how policymakers, bankers, and entrepreneurs around the world react to it.

.. However, now, specifically with respect to its enforcement of financial sanctions on an apparently compliant Iran, it is the United States that seems, even among its Western partners, to be the rogue state in need of policing. However begrudging European acquiescence to extraterritorial US sanctions may have been two days ago, it is more begrudging today.

.. More than that, the remaining counterparties of the Iran nuclear deal — China, France, Russia, the UK, and the EU — all want the deal to continue. They will be at pains to persuade Iran that it continues to enjoy significant sanctions relief relative to what it would face if it abandoned the deal. Which puts those countries between a rock and the hard-place of extraterritorial enforcement by the US of reimposed prohibitions. At a policy level, the remaining signatories now have an active interest in enabling, even encouraging, evasion of US financial controls, an interest that is morally and politically defensible. All of a sudden La Resistance among sullen French bankers isn’t just about the juicy fees foregone, but a heroic struggle to #resist Donald Trump, to prevent the renuclearization of Iran. And policymakers might agree.

.. That might mean taking some of the pressure off of European and vacation isle tax havens, reversing the recent, American-enforced trend towards transparency. It might mean partnering with China and Russia to participate in the parallel, alternative financial arrangements that those countries seek to develop. It plainly puts at risk the hard won, absolutely extraordinary, hegemony that American regulators have over global finance.

.. And for those among the US #resistance who see Vladimir Putin beneath every strand of orange hair, what Donald Trump has just done makes the possibility of a new Russian SWIFT considerably less laughable.

Interfluidity: Persuade

In my opinion, there is no substitute for actually persuading people who might not already be on our side. Could any claim be more banal than to say that politics is about persuading people? However, for a variety of reasons, I think at this political moment, it’s a claim that needs defending. There is a temptation among the most committed activists to be fatalistic about the possibility of persuasion, to imagine that all of those who are not already with us are irredeemable

.. The question of who are the authoritarians, who are the bullies, is actively contested in American politics, and not just by Rush-Limbaugh-types shouting “Feminazi!” When Trump supporters complain about “political correctness”, they are claiming that contemporary liberal norms have rendered it socially costly for them to speak freely and candidly even when they mean no harm.

.. Much of the work of Breitbart and Yiannapolis is explicitly devoted to widening the perceived incompatibility of civil rights and their supporters’ civil liberties. You can have one or the other, they suggest, a state in which men with arms protect your ordered freedoms, or one in which “those people” — liberals and Muslims and Black people and Berkeley students — are free and run roughshod over your liberties with tools ranging from accusations of racism to Molotov cocktails.

.. Persuasion is not about elegant logic or Oxford-style debates. It is about interacting, with good will and in good faith, with people who look at things differently, and working to understand how they see things so that you can help them understand how you see things.

.. Persuasion is not academic. It comes not from dispassionate observation of objects, but the interaction and interplay of subjects. Persuasion is personal. Laughter helps

.. we need only persuade the best 10% of them to put the fear of a much better God into Red-state legislators and to completely flip the arithmetic of political dominance in our country, despite its gerrymandered districts and quirky Electoral College.

.. Multiculturalism means not fearing what is ugly in other cultures

.. We take pride in embracing and respecting people who look and act very differently than we do, who follow strange creeds the substance of which we might disagree with, who follow customs that may render us uncomfortable and require an unusual degree of diplomacy when we are called to interact in any intimacy. These habits and skills, of which I think we are justly proud, are precisely what are required of us now. If we can be as open and charitable and welcoming and diplomatic across the fault lines which have snuck up within our politics as we are towards those we more easily recognize as outsiders, we have a real shot, not only to reconfigure the electoral numbers game, but also to forge a shared understanding that would transform what must begin as a pragmatic exercise in politics into an ethical enterprise after all.