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The Wrongologist

Geopolitics, Power and Political Economy

Monday Wake Up Call – December 10, 2018

The Daily Escape:

The twin peaks of Ushba, Caucasus Mountains, Georgia – photo by Pflunt

Last week, Bernie Sanders was with Paul Jay on the Real News Network. The discussion was about how growing income inequality isn’t simply unfair. Bernie said:

Concentration of wealth in America causes concentration of political power.

Sanders had spoken at (his wife Jane’s) Sanders Institute in Vermont on Wednesday. In his subsequent interview, Bernie said:

But it is not just that the one tenth of 1 percent owns more wealth than the bottom 90%. They don’t put their wealth underneath their mattresses….They use that wealth to perpetrate, perpetuate their power. And they do that politically. So you have the Koch brothers and a handful of billionaires who pour hundreds of millions of dollars into elections, because the Supreme Court gutted the campaign finance laws…and now allow billionaires quite openly to buy elections.

We all know that wealth equals political power. Sanders gave a great example:

Lloyd Blankfein, the head of Goldman Sachs, came to Congress a few years ago…after the taxpayers of this country bailed them out because of their greed and their illegal behavior…..These guys, after getting bailed out, they come to Congress. They say, you know what we think Congress should do is…cut Social Security, and Medicare, and Medicaid. And by the way, lower corporate tax rates and give more tax breaks to the wealthy. That’s power. That’s chutzpah. We have it all, we can do whatever we want to do.

He closes with this:

My vision is that we have got to have the guts to take on Wall Street, take on the pharmaceutical industry, take on the insurance industry, take on the 1 percent, and create an economy that works for all.

….We’re seeing great young candidates who didn’t wait on line for 20 years to get permission to run, but kind of jumped in and beat some long-term incumbents. They’re saying, hey, I come from the community. I know what’s going on in this community, and I’m going to fight for working people, and I’m not afraid to take on big money…..So a two-part approach…..we need to fight for our agenda. We need to elect candidates from the grassroots who…are going to implement that agenda.

Bernie is the best messenger about our urgent need to reform capitalism.

In a similar vein, Seth Godin wrote last week about what he calls “Linchpin Jobs”. These are jobs that few can do, and which contribute greatly to society. That’s an interesting concept, but Wrongo focused on his apt description of “Cog Jobs”, which anyone can do, and which can be done with little effort, or skills: (emphasis by Wrongo)

Industry offered a deal to the worker:

Here’s a job. We’ll pay you as little as we can get away with while still being able to fill the job. We’ll make sure it’s easy to find people for this job, because we don’t want you to have much in the way of power or influence….In return, you’ll work as little as you can get away with. That’s the only sane way to respond to the role of being a cog.

This is the dilemma that faces low-skilled workers today: They can find work, but they can’t live on what they make at only one job. Clearly, cog-like work doesn’t create nearly as much value as intelligent work, but not everyone can find a linchpin job, they’re rare.

Can the paradigm that concentration of wealth equals concentration of power be shifted? Is Bernie Sanders the next FDR? While Wrongo thinks we need a younger leader to reform capitalism, Bernie is the right messenger for reform. His effectiveness as a messenger is clear when we see that 70% of the American people now support Medicare for All, just two years after his 2016 campaign.

And the message is clear. Without reform, we’ll have to look our grandchildren in the eye, and say we’ve wrecked their future.

Time to wake up America! This is the signal issue of our time. The reform of Capitalism must be at the top of our agenda.

Whomever the Democrats nominate for president in 2020 has to be a person that can start America down the road toward reducing the concentration of both money and power in America.

The choice in 2020 will either be more Trump, or a Democrat.

We shouldn’t select another tepid corporate Democrat. They probably won’t win. If by some chance one wins, we’d have to watch as our society becomes even more unequal for the rest of our lifetimes.

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Places That Don’t Matter

The Daily Escape:

Maroon Bells, CO in winter – photo by Glenn Randall

America’s forgotten masses used the ballot box in 2016 to ram home a message to their betters. The message was that we shouldn’t ignore the places that don’t matter, those places that once had middle class jobs, and now have few options. The Trump election was one way to signal all was not well in the America’s decaying small towns.

We long ago retreated from the idea that the central government has a responsibility to look after the lagging places. It isn’t an invisible, unstoppable force that directs all the wealth generation to cities: It’s a system of deliberate centralization, by individuals who control capital, to concentrate productive efficiency and thus, wealth. The left-behinds are on their own.

The reality is that regional or town regeneration is very hard, once the original reason for the town’s existence is lost. Places that don’t matter have to find ways to build wealth locally, and then keep that money local. Locally produced goods and services keep regions alive.

Most solutions are based on the usual arm waving that says: “let them have training” or, “they really need to move where the jobs are”. These ideas have largely failed. Figuring out how to revive these communities requires better policies.

The revenge of the places that don’t matter is the rise of local populism, the increasing opioid use, and declining longevity. The stakes are high, but maximizing the development potential of each town has got to be the answer.

Here is one solution. The WaPo has a long read about how a liberal DC entrepreneur set out to help West Virginians. And for a very long time, Joe Kapp’s help was refused. He was the object of a vicious online campaign, targeted by homophobia, and maligned as a carpetbagger.

When Kapp, 47, an entrepreneur decamped to a West Virginia cabin in 2012 with his partner, he’d come to take a sabbatical. The town is Wardensville, pop. 256. From WaPo:

Those who do work locally gravitate toward poultry processing, furniture manufacturing and agriculture, but the numbers aren’t good. In 2015, the unemployment rate…was 7.5%, compared with 6.7% statewide and 5.3% nationally. The per capita income…was just under $28,000 a year, compared with about $37,000 for the state, and $48,000 nationwide.

The basics are lacking. The area doesn’t have Internet. Kapp says:

You’ve got kids doing their homework in McDonald’s parking lots. People in most of the country just have no idea.

And even community college enrollments suffer. Only 10% of West Virginia high school students enroll in community college, compared to 50% nationwide.

Kapp soon befriended the president at the local community college. From there, it wasn’t long before he was helping the college launch an innovative project, the Institute for Rural Entrepreneurship and Economic Development (IREED), aimed at helping to diversify the regional economy.

Kapp initially failed to gain traction, but things have gradually turned around. He thinks this demographic has more potential than the coastal elites give them credit for. He is certain that by harnessing local knowledge, like agriculture, they can start businesses, and put their own people back to work.

Every town wants its own Amazon, but in rural communities, that’s not an option. They need to create an ecosystem that promotes a small-business culture and entrepreneurship. So Kapp’s assistance in establishing the IREED with the community college got the idea off the ground. No community college in the state had anything of the kind.

The goal of the IREED is to help the local agricultural community think of itself as entrepreneurial.

He is developing a program that will allow community colleges to offer low- or no-interest micro-loans, around $5,000, to aspiring entrepreneurs. These individuals would then take entrepreneurship and business-development courses at the lending college. Kapp:

A bank might say, ‘This guy’s too risky,’ But a community college can say, ‘I know this guy. We work with him. I am vetting and validating his ability to be able to pay back the loan.’

In other words, it’s development banking on a community level. Today, most community banks mainly fund real estate, and they still follow the model where the borrower needs to pledge collateral to get the loan. In a world where services are the business’s primary asset, collateral has no meaning.

So the micro-loans by schools may be a perfect first step to bootstrapping these persistently poor towns.

This is a tentative step. It may not be scalable, but if we are looking for the greatest “social impact indicators”, it is the degree to which people feel secure economically, and safe in their community.

Always has been, always will be.

(The concept of this column, although not the solutions, is taken from “Revenge of the Places That Don’t Matter” by Andrés Rodríguez-Pose, Professor of Economic Geography, London School of Economics. Originally published at VoxEU)

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GOP Asks “Hillbilly Elegy” Author To Run For Senate

The Daily Escape:

Snow in the Sahara Desert, Algeria. The snow lasted only a few hours on the ground, since the average low winter temperature is 54°F – 2018 photo by Zinnedine Hashas

With the speculation about Oprah as a candidate, we knew it wouldn’t be long before the Republicans dredged up a celebrity non-politician too. Politico is reporting that Mitch McConnell wants JD Vance to run for the Senate in Ohio against Dem incumbent Sherrod Brown:

Top Senate Republicans have quietly reached out to J.D. Vance — the star author of “Hillbilly Elegy” — about running for Senate in Ohio after the abrupt withdrawal of GOP candidate Josh Mandel last week… McConnell has told associates that he would prioritize the race if Vance jumps in.

McConnell has a good idea. If Vance runs, he is interesting enough to force Democrats to defend an otherwise safe Senate seat. People seem to think Vance is a white working class whisperer.

Wrongo and Ms. Right were persuaded by many Eastern Liberal Elite friends to read Mr. Vance’s book. The pitch was that Vance explains to liberals why white Trump voters from southeastern Ohio and West Virginia wouldn’t vote for Hillary, and don’t lean progressive in their politics.

Maybe. Wrongo thinks that by writing his book, JD Vance was just pushing propaganda that fits the policy preferences of leading Republicans. Try reading this:

We spend our way into the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don’t need, refinance them for more spending money, and declare bankruptcy. . . . Thrift is inimical to our being.

Or, this:

We choose not to work when we should be looking for jobs…

Vance’s stereotypes are shark bait for conservative policymakers. They feed the mythology that the undeserving poor make bad choices and are to blame for their own poverty, so why waste taxpayer money on programs to help lift people out of poverty? After all, Vance got out of hillbilly Ohio without them.

People shouldn’t decide policy based on Vance’s anecdotes; they should care about the bigger picture. After all, are conversations with cab drivers a sound basis for economic and geopolitical policy?

It is depressing that Vance places so much blame on welfare rather than, say, neoliberalism and corporatism. They are the ideologies that moved jobs offshore. Their firms leveraged, and later bankrupted manufacturing firms in the heartland. They are the ones who precipitated the economic holocaust in Middle America.

And despite what Vance tells us, most poor people work. Of the families on Medicaid, 78% include a household member who is working. People work hard in jobs that often don’t pay them enough to live on.

After graduation from Yale, JD Vance became a venture capitalist. First, he worked in Silicon Valley for Peter Thiel, and now works for Revolution LLC, a Washington, DC-based venture capital firm, co-founded by AOL founders Steve Case and Ted Leonsis.

It is fair to say that Vance’s hillbilly days are way back in the rear-view mirror. Yet, he remains naïve. He was on “Face The Nation” on December 31st, talking about the Trump tax cut:

When the president talks about tax reform, he talks about the people who will benefit…He talks about American jobs. He talks about the fact that we’re going to be taking money that’s overseas and bringing it back to the US so that it will employ American workers. I think that focus again on the American working and middle class is- is-is to me the most thoughtful and, in some ways, the most genius part of Trump’s approach to politics.

Vance just revealed himself to be another reptilian conservative. We should remember this quote from economist J. K. Galbraith:

The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

The grift goes on.

 

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How Wrong Were Wrongo’s 2017 Predictions?

Wrongo is not a futurist, or a stock-picker with mad skills. On January 2 2017 he made a series of predictions about the year to come. Let’s see how wrong he was:

  1. There will be more global political and social turmoil:
    1.  The EU could collapse: That didn’t happen, as Macron soundly defeated LePen. OTOH, Merkel barely survived her election and May lost badly in a wrongly-played attempt to gain a super majority in the UK. Wrongo gets a “D” in this prediction.
    2. China’s economy is wobbling: and it still is, but a command economy can create its own reality. Wrongo gets a “C”.
  2. The US will continue to lose influence globally despite “Mr. Unpredictable” becoming our Orange Overlord: Wrongo gets an “A”. From Western Europe to the Middle East and Asia, there is not a single example of where Trump has put America in a position of greater influence in the past year. Except for Israel: they plan to name a train station after him.  Think about it, what great man only gets a train station?
  3. Trump arrives in the Oval Office as an overconfident leader, the man with no plan but with a short attention span, and within six months he will have his first major policy failure: Was his first policy failure the immigration ban? The North Korea diplomatic fiasco? The multiple attempts to repeal Obamacare? Walking out of the Trade Agreement, giving China a free hand in Asia? Give Wrongo an “A”, except that Wrongo added:

This will make him more subdued, more conservative and less populist thereafter.

Trump was less subdued, less populist, and clearly more conservative as he played to his base. Give Wrongo a “B”.

4. The triumvirate of Russia/Turkey/Iran will elbow the US firmly out of the Fertile Crescent, and secure friendly regimes in Damascus and Baghdad. An easy “A”. Wrongo went on to say:

This will push American influence in the Middle East back to just the Gulf States, a weakened Saudi Arabia, and an increasingly isolated Israel.

A home run for Wrongo, but not for America.

  1. Domestically, drug abuse, suicide, and general self-destructive behavior will continue to climb and become impossible to ignore: Sadly, another “A”. Trump’s declaration of the opioid crisis as a “Health Emergency” was a public relations exercise with no plan about how to truly deal with the crisis. Wrongo also said:

The growing antibiotic resistance to main stream drugs will impact health in the US.

This is very true here, as well as globally. There is no political push to force drug companies to deal concretely with this issue.

6. The Trump stock market rally has already turned into the Santa Selloff:  Give Wrongo an “F” on this prediction. While the Dow closed 2016 at 19,719, we are looking to close 2017 above 24,000, up nearly 18% in the past year.

Meta Prediction: Some people who voted for Trump have incompatible outcomes in mind, so it’s a virtual guarantee that a sizable minority are going to feel cheated when they fail to get what they were promised: This was hard to get wrong, so give Wrongo a gentleman’s “C”. Wrongo went on to say:

OTOH, when Trump fails, most of his base will blame anyone but the Donald. The question is, when disillusionment sets in, will the reaction be a turning away, or a doubling down on the anger? Wrongo thinks anger will win out.

An easy “A”.

Here is the part of the prediction that was 100% spot on:

The coming Trump administration will seem like a fractious family outing: Just under half of the family (the “landslide” segment) wanted to take a ride, but now, the whole family has to go. Those who wanted to stay home will sulk in the back seat while Daddy tells them to shut up and stop bitching.

Meanwhile, once we are out of the driveway, it dawns on everyone that Daddy hasn’t decided yet where to go. Everyone pipes up with suggestions, but Daddy again tells everyone to shut up, because it’s his decision alone…Daddy won’t reveal the destination, but insists everyone will love it once they get there, even those who wanted to stay home, those who wanted to go to the beach, and those who wanted to head over the cliff like Thelma and Louise.

2018 predictions will come in the New Year.

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