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The impact of right wing economics

Written By: - Date published: 8:14 am, November 6th, 2011 - 32 comments
Categories: capitalism, class war, us politics - Tags: ,

This infographic by Bill Marsh in the New York Times did the rounds a while ago.

1980 saw the election of Ronald Regan as US president. On taking office at the start of 1981 he ushered in a package of right wing economic policies that soon picked up the nick-name “Reganomics”. How did that work out for workers and for inequality?

Bill Marsh/The New York Times
Sources: Robert B. Reich, University of California, Berkeley; “The State of Working America” by the Economic Policy Institute; Thomas Piketty, Paris School of Economics, and Emmanuel Saez, University of California, Berkeley; Census Bureau; Bureau of Labor Statistics; Federal Reserve

32 comments on “The impact of right wing economics”

  1. RedLogix 1

    A comment last night pointed to this IMF article about Iceland. In that was mention of recent IMF research:

    IN his influential 1975 book Equality and Efficiency: The Big Tradeoff, Arthur Okun argued that pursuing equality can reduce efficiency (the total output produced with given resources). The late Yale University and Brookings Institution economist said that not only can more equal distribution of incomes reduce incentives to work and invest, but the efforts to redistribute—through such mechanisms as the tax code and minimum wages—can themselves be costly. Okun likened these mechanisms to a “leaky bucket.” Some of the resources transferred from rich to poor “will simply disappear in transit, so the poor will not receive all the money that is taken from the rich”—the result of administrative costs and disincentives to work for both those who pay taxes and those who receive transfers.

    Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another?

    In a word, no.

    In recent work (Berg, Ostry, and Zettelmeyer, 2011; and Berg and Ostry, 2011), we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.

    In dry eco-speak these guys are basically say that the entire neo-liberal madness was predicated on a mistake.

    • Colonial Viper 1.1

      In dry eco-speak these guys are basically say that the entire neo-liberal madness was predicated on a mistake.

      No, you’re letting these guys off too lightly.

      The elite of society and finance saw an opportunity in the 1980’s to tilt wealth and influence back in their favour. Neo-liberalism was a tool they decided to use to do that.

      The fact that the theory was unsound or the implementation was not what the theory predicted is irrelevant because that was not what the elite of society and finance was interested in.

      A return to the gilded age however, was.

  2. mik e 2

    The facts are blindingly obvious all we need now to compound the US ‘s dire situation is for a republican tea party win in the senate and a republican president and the US will fall flat on its face just as the last time these factors were in place!

  3. Afewknowthetruth 3

    The ‘increased productivity’ myth gets repeated ad infinitum.

    An increase in mechanisation over time allowed humans to convert what nature produces (produced) into waste much faster than in the past.

    It follows, as sure as night follows day, that when oil depletion reaches a critical point ‘productivity’ will decline dramatically, taking down house-of-cards economics with it.

    The main points of interest to anyone suviving the Peak Oil bottleneck will be:

    1. Will psychotic sociopaths remain in control of whatever remains of society?

    2. Will the Earth remain habitable for humans?

    At this stage the answers look like 1: Yes, and 2: No.

  4. Afewknowthetruth 4

    On the matter of the failure of the growth model, and the collapse which is underway which is due to ‘government and finance betting on a future that cannot exist'::

    ‘My neat and tidy taxonomy of collapse, “The Five Stages of Collapse,” has been read more than 70,000 times just on my blog alone since I first published it in February of 2008. It continues to be popular: there were over 10,000 hits to the page just this year. People must still be finding it helpful.’

    http://cluborlov.blogspot.com/2011/10/stages-of-collapse-revised-joined-at.html

    ‘I wished for an orderly cascade of collapsing institutions, with enough of a gap between them for public psychology and behavior to adjust to the new reality. But almost four lost years of both government and finance betting on a future that cannot exist, doubling down every time they lose again, have dashed those hopes. The effect, I think, will be to compress financial and political collapse into a single chaotic episode. Commercial collapse will not be far behind, because global commerce is dependent on global finance, and once international credit locks up the tankers and the container ships won’t sail. Shortly thereafter it will be lights out.’

    • One Anonymous Bloke 4.1

      Obviously your work must be brilliant – so many people have read it. You can apply the same logic to Atlas Shrugged.
      Still no peer-reviewed citations then?

      • Draco T Bastard 4.1.1

        You really should read what’s linked, or even the link, before spouting off. That way you wouldn’t look like a right twerp.

        • One Anonymous Bloke 4.1.1.1

          Sorry to burst your self-inflating bubble, Draco: I did read it. It is utterly devoid of citations or references, simply being an opinion piece that regurgitates AFKTT’s relentless mantra, tiresome, biased, and unsupported.

          • M 4.1.1.1.1

            Dimitri Orlov is excellent and always delightfully phlegmatic – even if you cannot stomach other commentators this guy is calm and matter of fact when laying out how we have bumped up against resource limits:

            http://www.youtube.com/watch?v=wCmgEN-F-gc

            • RedLogix 4.1.1.1.1.1

              I’ve read and listened to a lot of Orlov, but this is superb.

              I worked for period in Russia some years back and it left me with just enough experience to recognise Orlov’s line of thinking as absolutely correct. I’ve seen exactly what he says about Russia being ‘collapse resistant’ for myself.. and how deeply unprepared most Western nations are by comparison.

          • Colonial Viper 4.1.1.1.2

            OAB:

            There will be no real world economic recovery in NZ as long as petrol stays over $2/L.

            Bet on it.

          • Draco T Bastard 4.1.1.1.3

            The impression I get from you is that even if you had read the peer reviewed articles that backs up what AFKTT says you still wouldn’t accept an opinion piece that said the same thing. In fact, I get the distinct impression you wouldn’t accept the peer reviewed stuff either.

            • One Anonymous Bloke 4.1.1.1.3.1

              Draco, again your assumptions are letting you down: I can and do read a great deal of material, and I am used to finding and checking sources, and you will note my tendency to link directly to them. I don’t trust videos: they can be made to say anything the editor wants them to.

              AFKTT is a 9/11 and Moon landings “truther”, which does her/his credibility on economic and climate matters no good whatsoever, since it points to confirmation bias of epic proportions, to put it mildly. Extraordinary claims require extraordinary evidence. Google Scholar is your friend.

              Oh, and don’t forget why science works: peer review is a concerted effort to dig holes in your argument, undermine your conclusions, spot errors in your measurements. Presenting article after article making the same point over and over again does the opposite. In other words, the arguments as presented fail the baloney detection test.

              “Blaming the internet for your gullibility is like blaming the screwdriver for your neurological impairment.”

              • uke

                Peer review is not full-proof. An interesting review of the failures of this system by Juan Miguel Campanario:
                 
                Rejecting and resisting Nobel class discoveries: accounts by Nobel Laureates
                 
                “I review and discuss instances in which 19 future Nobel Laureates encountered resistance on the part of the scientific community towards their discoveries, and instances in which 24 future Nobel Laureates encountered resistance on the part of scientific journal editors or referees to manuscripts that dealt with discoveries that later would earn them the Nobel Prize.”

                • One Anonymous Bloke

                  Of course peer review isn’t fool-proof , but it’s the worst possible system apart from all the other ones.

    • Draco T Bastard 4.2

      This is a good read as well.

      Hubbert said, “The third curve (on the left) is simply the mathematical curve for exponential growth. No physical quantity can follow this curve for more than a brief period of time. However, a sum of money, being of a nonphysical nature and growing according to the rules of compound interest at a fixed interest rate, can follow that curve indefinitely…Our principle constraints are cultural…we have evolved a culture so heavily dependent upon the continuance of exponential growth for its stability that it is incapable of reckoning with problems of non-growth…it behooves us…to begin a serious examination of the…cultural adjustments necessary…before unmanageable crises arise…”

      • One Anonymous Bloke 4.2.1

        The statistical analysis is somewhat beyond me, but J.H. Laherrère’s analysis of the strengths and weaknesses of the Hubbert curve concludes:

        “Hubbert’s modelling technique has been variously applauded and criticised, but the constraints to its application have not been widely appreciated. It works well only where applied to a natural domain, unaffected by political or significant economic interference; to areas having a large number of fields; and to areas of unfettered activity.”

        “As far as the laws of mathematics refer to reality, they are not certain, as far as they are certain, they do not refer to reality.” Albert Einstein.

        • Draco T Bastard 4.2.1.1

          Hell, and now you’re even denying reality.

          • One Anonymous Bloke 4.2.1.1.1

            If you’re referring to Einstein’s remark, it’s a corollary of the saying “all models are wrong some models are useful”. Or do you think I’m denying the inevitability of Peak Oil? Or are you just spraying attack lines without any clear purpose like a demented wingnut?

            • Colonial Viper 4.2.1.1.1.1

              The inevitability of peak oil?

              Peak conventional oil is history my friend, went by us several years ago.

              Why do you think that the world will have zero net economic growth per capital for years now?

              • One Anonymous Bloke

                Good point, bad choice of words :)

                • Afewknowtheturth

                  OAB

                  A deep rooted arrogance, combined with insecurity, which manifests as the need to put down other people and try to score points off them, rather than seek and discover truth.

                  • NickS

                    So says the conspiracy wanker who couldn’t logic his way out a paper bag…

                  • One Anonymous Bloke

                    According to you, you have discovered the “truth” about all sorts of things: the Moon landings, 9/11, macro-economics and probably HAARP too. Insecurity sounds preferable.

          • NickS 4.2.1.1.2

            He’s not saying anything particularly all that different than the philosophy of science cluebats dealing with uncertainty that I’ve posted here in the past. Only his deals with mathematical modelling, and without as many words.

            Because he cheated.

            With quotes.

            Grrr.

  5. randal 5

    all the above is true but reagans activities must be reckoned as a whole.
    how many aircraft carriers, nuclear submarines etc were made during his tenure.
    to secure that amount of confidence in any economy requires massive amounts of payoffs to the consumer. and generating the common psychology. Think the “Eagles”. In the end it all turned to shit as the economy was deflated by the savings and loan scandals and the crash of ’87.
    so who won?

  6. randal 6

    Oh and I forgot to mention the introduction of the PC and spreadsheets where any old accountant could steal everything with the strok of a keyboard.

  7. RedLogix 7

    Kim Hill interviewed Dr Ravi Batra this last Saturday morning.

    Batra is a professor of economics at Southern Methodist University, Dallas, and the author of five best-selling books. His 1978 book, The Downfall of Capitalism and Communism, predicted the downfall of the Soviet Union, and his 2008 book, The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos (Palgrave Macmillan, ISBN: 978-0230613959), predicted the current economic crisis.

    • Afewknowtheturth 7.1

      RL

      That’s all very well but ‘where are the peer reviews and citations?’

      According to ‘our friend’, without those Batra’s just another conspiracy wingnut who wears a tinfoil hat and gets too much exposure.

      • One Anonymous Bloke 7.1.1

        You’re getting close. The fact is that even the most well-informed single opinion is just that: a single opinion. Lots of people “predicted the current economic crisis”, so that in itself is hardly a ringing endorsement – did Batra put his money where his mouth was like Eisman? Wikipedia is more forthcoming: “Batra proposes an equitable distribution system known as PROUT ( PROgressive Utilization Theory) as a means to not only ensure material welfare but also to secure the ability of all to develop a full personality.”

        “The Prout cooperative system is founded on the principle of “coordinated cooperation,” where free human beings with equal rights and mutual respect work together for the welfare of all.”

        “The colour of the sky is green on Dr. Batra’s planet” (I made that one up).

        “In 1993, Batra received the Ig Nobel Prize in economics.”

        Sounds like a real guru, doesn’t he?

        But this merely serves to emphasise the point I have been trying to make – AFKTT, all you ever do is post links to people who you think agree with you, whether or not their views are consistent with one another.

  8. John 8

    I’m not a “Key Person” in the new world of Key, I’m a Key statistic, you failed on jobs and that has repercussions after 36 months of dribble from the trickle down.

    The Key Job Losses are what is important, how are those jobs coming back fast? 36 Months and nothing!!!!

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