Friday, January 10, 2020

The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.  We are "turning Japanese", and not in a good way either.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory is interesting, it only seems to explain, at most, a tiny portion of the overall trend of secular stagnation.  In fact, a recent study by the American  Economic Association found that there is essentially no robust correlation between population aging and economic growth (or lack thereof).  Why?  Advances in automation and robotics seem to offset the putative adverse effects of an aging workforce to the point where the effect of aging is practically negligible.

In fact, another recent study finds the ideal total fertility rate (TFR) in terms of standards of living overall is in fact in the 1.5-2.0 range, basically the same as what the TSAP has long advocated since our founding nearly a decade ago in 2009.  Yes, really.  Take that, birth dearthers!

Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.  Though meanwhile, renewable energy technologies are making massives strides, which again looks like it will offset such trends at least partially.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

In fact, in our Monetarily Sovereign federal government, Congress can simply spend new money into existence without the strings of interest attached, and without any corresponding increase in tax revenue either.  Rodger Malcolm Mitchell notes this in his Ten Steps to Prosperity, which includes, among other things, Medicare For All, free college for all, and a form of UBI as well.  Interest rates can still be used by the central bank as an inflation-fighting tool, but the creation of money will be decoupled from it.

(Note to Japan:  You should do the same thing as well, especially the helicopter money (QE for the People) and UBI.  Then you will finally get out of your 30 year funk, and possibly even raise your birthrates a bit.)

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

Friday, January 3, 2020

Did Trump Just Start A War With Iran?

On January 2, 2020, Trump apparently ordered a drone airstrike near Baghdad, Iraq, that killed Iran's top general, Qassim Soleimani.  This assassination was of very, very questionable legality given that Trump did not notify Congress (or really anyone else, for that matter) before giving the orders.  And now Iran is openly threatening (unspecified) revenge and retaliation for this foolish and reckless act of bravado and hubris by the Manchild Who Would Be King.

We are well aware that General Soleimani was not a good person by any stretch of the imagination, nor is his own Revolutionary Guard Quds Force particularly cuddly either.  They have in fact been officially designated as a terrorist organization by the United States Department of State years ago due to their notoriously rogue activities in the region, including their support for violent militias in Iraq.  But when the "leader" of the USA decides to go rogue himself and arbitrarily assassinate a leader of a sovereign nation that we are NOT actually at war with, that is a dangerous and irresponsible escalation that threatens to unleash a conflagration across the whole region, if not even further.  At the very least, it will delay any hope for peace in the region by at least a generation, and at worst can perhaps even trigger World War III.

And of course we can kiss goodbye practically forever any chance of reviving the Iran nuclear deal that, while imperfect, was in fact working to keep Iran from getting their hands on The Bomb for the foreseeable future--before Trump pulled out of it of course.  If Iran didn't have a reason to want nukes in the past, well they sure do now!  This latest stunt thus clearly does FAR more harm than good, and we at the TSAP condemn his reckless and irresponsible actions.

(As for motives, can you say, "Wag the Dog"?)

Wednesday, January 1, 2020

State Of The Planet Address 2020

It is now 2020, and this year the TSAP will not waste any time giving our annual State of the Planet Address.  Yes, we know it is a bit of a downer to say the least.  So sit down, take off your rose-colored glasses, and read on:

Our planet is in grave danger, and has been for quite some time now.  We face several serious long term problems:  climate change, deforestation, desertification, loss of biodiversity, overharvesting, energy crises, and of course pollution of many kinds.  Polar ice caps are melting.  Rainforests have been shrinking by 50 acres per minute.  Numerous species are going extinct every year.  Soil is eroding rapidly.  Food shortages have occurred in several countries in recent years.  Weather has been getting crazier each year thanks to climate change.  We have had numerous and often record-breaking wildfires, floods followed by long periods of drought, and a "storm of the century" at least once a year for the past several years.   And it is only getting worse every year.  In fact, 2016 has been the hottest year on record, and 2017 was the hottest year without an El Nino.  Look no further than the three record-breaking storms in the past 15 years:  Katrina (2005, highest storm surge), Sandy (2012, largest diameter), and now Harvey (2017, a 1000-year flood, and overall worst hurricane on record), followed by Irma and Maria which devastated Puerto Rico, for a taste of the not-too-distant future.  And that was before Hurricane Michael devastated a rather large chunk of Florida recently.

In fact, on the other side of the world, just a little over two years ago, the worst monsoon season in recent memory has recently displaced 41 million people due to record flooding.  At the same time, severe, bone-dry droughts have been plaguing the Horn of Africa for over a decade now.  Thus for many, the future is sadly already here to one degree or another.

Australia is on fire right now, with record heatwaves and massive wildfires (with koalas now basically endangerd as a result), and California was recently on fire as well, again.

None of this is an accident of course.  These problems are man-made, and their solutions must also begin and end with humans.  We cannot afford to sit idly by any longer, lest we face hell and high water in the not-too-distant future.  Our unsustainable scorched-earth policy towards the planet has to end.  Yesterday.

While we do not invoke the precautionary principle for all issues, we unequivocally do for the issue of climate change and any other environmental issues of comparable magnitude.  In fact, for something as dire as climate change, as of 2015 we now support a strong "no regrets" approach.  With no apologies to hardcore libertarians or paleoconservatives, in fact. We are not fazed one bit by the naysayers' pseudoscience as it does not really "debunk" the scientific consensus on anthropogenic global warming. The only serious debate is about how fast it will happen, and when the tipping point (or points) will occur. It is not a matter of if, but when. And the less precarious position is to assume it is a real and urgent problem. We need to reduce CO2 emissions to the point where the CO2 concentration is at or below 350 ppm, ASAP.  And it is currently at an unsustainably high level of 400+ ppm, and growing rapidly every year.

Given the latest IPCC report, which is truly nothing short of horrifying, the general consensus among climate scientists is that we have only at most 12 years left (now more like 11) to act radically before truly catastrophic climate change is a foregone conclusion.   And 2030 will be here before we know it.  

Now THAT is a national emergency!  And a global one, in fact.  Thus, a full-steam-ahead, Green New Deal 2.0 is LONG overdue.  We have already squandered a whole decade since Copenhagen, and we cannot afford to squander even one more day, let alone another decade.

Solving the problem of climate change will also help to solve the other ecological crises we are facing, for they all ultimately have the same root causes, not least of which is our insatiable addiction to dirty energy.  However, there is a right way to solve it, and several wrong ways.  Technology is important, but it won't be decisive on its own (economics geeks may recall Jevons Paradox).  The real problem is the paradigm that our society has been following, and that system is based on wetiko, the parasite of the mind and cancer of the soul.  It often seems that the only difference between capitalism and cannibalism is the spelling.

The TSAP endorses the ideas embodied in Steve Stoft's new book Carbonomics, most notably a tax-and-dividend system that would tax carbon (i.e. fossil fuels) at the source, and give all Americans an equal share of the revenue generated from this tax.  (Note that our proposal to tax natural resources and pay out an Alaska-like citizen's dividend already includes this.)  Yes, prices for various things would undoubtedly rise due to this tax, all else being equal, but the dividend will allow Americans to pay for this increase. The average American would in fact break even, but those who (directly or indirectly) use less energy than average will effectively pay less tax, while the energy hogs will effectively be taxed more, as they should be. Thus it is certainly not a regressive tax, and may even be mildly progressive. This is both the simplest and most equitable way to reduce carbon emissions as well as other forms of pollution, not to mention waste of dwindling non-renewable resources. The real challenge is getting the feds to accept something that won't directly benefit them (in the short term).  Carbonomics also includes other good ideas, such as improving how fuel economy standards are done, and crafting a better verison of the Kyoto treaty.   

In addition to the ideas in Carbonomics, we also support several other measures to help us end our addiction to fossil fuels once and for all.  Our Great American Phase-Out plan would phase out all fossil fuels by 2030 at the latest, via alternative energy, efficiency, and conservation.  One good idea to further the development of alternative energy would be the use of feed-in tariffs for renewable power sources. 

Of course, it is not enough to stop emitting carbon dioxide, we also need to remove the current excess levels of it from the atmosphere as well, as that stuff can otherwise linger for centuries and continue wreaking havoc on the climate.  We support ending net deforestation completely, planting a LOT more trees, and putting carbon back in the ground through carbon sequestration. One method is known as biochar, a type of charcoal made from plants that remove carbon dioxide from the air, that is subsequently buried. This is also an ancient method of soil fertilization and conservation, originally called terra preta.  It also helps preserve biodiversity.  Another crucial method would be regenerative organic farming, which also turns the soil into an effective carbon sink as well.  And we will most likely also need to employ higher-tech methods of sucking carbon out of the air as well.

We've said this before, and we'll say it again.  Our ultimate goal is 100% renewable energy by 2030, but we need to hedge our bets.  We can phase out fossil fuels, or we can phase out nuclear power, but we can't do both at the same time--and fossil fuels need to be phased out first, and quickly.  Nuclear is doing a pretty good job of phasing itself out as it is.  So let's not get rid of it prematurely.  

But the biggest elephant in the room (make that the elephant in the Volkswagen) is overpopulation.  It does not make for pleasant dinner conversation, but it must be addressed or else all other causes become lost causes in the long run. We absolutely need to have fewer kids, or nature will reduce our population for us, and the latter will NOT be pleasant to say the least. The TSAP believes in voluntarily reducing the total fertility rate (TFR) to 1.5-1.9 children per woman to do so, but let us be clear that we do NOT support draconian and/or coercive measures of population control (like China has used).  We believe that more liberty is the answer, not less.  In fact, the two most effective means of reducing the birthrate are poverty reduction and female empowerment.

Fortunately, America's TFR has recently dropped to a record low of about 1.73 with no indication of rising back above replacement rate in the near term.  But clearly we cannot keep growing and growing, that's for sure (in fact, we need to shrink). And our insatiable addiction to economic growth (despite being decoupled from well-being) is also every bit as harmful as overpopulation as well, if not more so.  Growth for the sake of growth, the ideology of the cancer cell,  is clearly one of the most asinine obsessions our nation (and world) has ever had.  We clearly need to transition to a steady-state economy, most likely following a period of what Naomi Klein calls "selective degrowth" as well.  And to do that, we need a radical paradigm shift to happen yesterday.  Put another way, we need to leave room for Nature, lest Nature not leave room for us.  We have been warned, decades ago in fact.  Unfortunately, such warnings have largely fallen of deaf ears until very recently.

Yesterday is the time to jettison the Twin Big Lies that "everybody must work for a living" and "everybody must procreate".  Because doing so is the sine qua non of any realist plan to avert ecological catastrophe.

Last but not least, the TSAP now believes that as long as men remain in charge, we are all merely rearranging deck chairs on the Titanic.  Let's face it, it ain't gonna be us fellas who will save the world, as the past 7000 years or so have shown.  We paved paradise and put up a parking lot, we created a desert and called it peace.  We devoured and suffocated our own empire, and our proverbial 15 minutes of fame is almost up.  Only when women finally take over and reclaim their rightful position as the new leaders of the free world--and they will--will there be any real permanent solution.

Bottom line: we need to take the environment much more seriously than we do now.  We ignore it at our own peril.  And while the current administration in DC clearly doesn't care, We the People must act nonetheless.  With no apologies to the deniosaurs or Big Oil or Big Gas, or Dirty Coal.

Oh, by the way, wanna hear a joke?  Peak Oil.  Not saying it won't happen, of course--it will eventually peak and decline at some point--but climate change kinda supersedes it.  While conventional oil most likely has already peaked, there is more than enough total oil (including unconventional) to deep-fry the Earth--and most of which needs to stay in the ground if we wish to avoid catastrophic climate change.  Fossil fuels are, after all, what Buckminster Fuller referred to as our planet's "energy savings account", which we need to wean ourselves off of and save just in case of a planetary emergency--and he first said this in 1941!

So quibble all you want, but the truth must be faced head-on.  Hindsight is 2020, and we have a planet to save.  So let's roll!