August 15, 2010 By Paul Crist  Mexico’s once growing middle class is under attack from above and below, and the stress is showing up in the shrinking numbers who can claim middle class status.  This trend predates the current economic crisis, but has been greatly exacerbated by it.  Middle class Mexicans face a political and economic system stacked in favor of the super-rich above them, while from below they face kidnappings and robbery by desperate and angry criminal poor. Predation from Above: Despite modest progress, entrenched crony capitalism where bribery is the rule and who-you-know counts for more than knowledge, hard work or risk-taking, remains the order of the day in Mexico.  Leaders from across the spectrum of Mexican politics must accept the majority of blame, although there is culpability north of the Mexican border as well.  Progress toward political transparency and economic liberalism has been incremental in some areas, nonexistent in others.  Privatization of formerly government-controlled industries have enriched a handful of wealthy and politically connected Mexicans, as well as a fair number of politicians.  As a popular Mexican saying goes “un político pobre es un pobre político,” (“A poor politician is a poor politician”). Mexican consumers pay higher prices for a lower quality of service and reduced availabil­ity of goods.  The state-corporatist system of price supports, subsidies, and special-interest tax exemptions gives an unfair advantage to wealthy and well-connected businessmen while restricting competition and obstructing eco­nomic growth.  Of course, the most critical result of anticompetitive policies for Mexican

Read More...

Paul Crist August 13, 2010 Framing the Issue: Class War The white-hot anger on the “Tea Party” political right and the frustration on the political left largely spring from the same fundamental problem: A generation of increasing economic inequality, job insecurity, loss of privilege, and a once optimistic middle class that is under attack and demoralized. Political and mainstream corporate news media leaders avoid the term, but what we are confronting is class warfare in America.  The conflict is essentially between the owners of capital, and the owners of labor.  The battle lines are less clear than in the past, but this is not the first time in our national history that we’ve been here.  In the late 19th and early 20th century, there was only a small middle class relative to the population.  The period from 1940 to the 1960’s saw a tremendous growth of a middle class that, while their principal asset remains labor, also holds some capital assets (home equity, stock ownership, and retirement funds) that they fiercely desire to protect.  That has helped society’s true economic elites to enlist a substantial subset of the middle class to espouse a capitalist ideology that is largely in opposition to their real economic interests.  Asset price bubbles during the past several decades helped to strengthen the ideology of wealth acquisition through capital ownership among middle and working classes, but the bursting of the housing price bubble and consequent financial crisis has been a major blow to the middle class

Read More...

The U.S. economy and the manufacturing sector in particular, face both short-term and long-term challenges.  There is debate about whether government can or should play a role in addressing those challenges, and if so, what are the fiscal, industrial, regulatory, and trade policies that would benefit the stakeholders, which essentially include all U.S. citizens in one way or another. I should acknowledge at the outset a bias toward thoughtfully considered government interventions to guide the economy and trade in ways that benefit American workers and allow them to participate in the gains that accrue from their labor.  There are economic reasons for my bias that have nothing to do with either socialist or altruistic impulse.  That bias in no way means that I favor protectionism or a retreat from global trade, or that government intervention in the economy is always desirable, but there are, I believe, issues and stakeholders that get too little consideration and solutions to structural economic problems that are given short shrift in the name of conservative ideological orthodoxy. There is ample evidence that without adequate and well-designed regulatory intervention in domestic and global markets, capital and political power tends to migrate upward and become concentrated at the top of the economic ladder. We see that phenomenon in country after country, most recently in the U.S.  Concentrated wealth becomes problematic when it undermines social cohesion and a sense of shared purpose.  The wealth/income gap is at the core of social and political stress and instability in most

Read More...

By Paul Crist, August 10, 2010 The bad news is that the fundamental problem faced by Social Security and Medicare in future years is that the decades-long trend of fewer workers supporting increasing numbers of beneficiaries will become critical, potentially threatening the solvency of the system unless some changes are made. The good news is that there is a simple solution to the worker shortfall.  The bad news is that political posturing, racism and hyper-nationalism is preventing us from adopting that very simple solution. These programs, despite what we hear about the “Social Security Trust Fund” operate on a pay-as-you-go basis.  The “trust fund,”  while real in certain respects, is more of an accounting figure, based on the excess paid-in contributions from workers and employers to the system that are not required to fund current benefit payments to retirees, survivors, the disabled, and administrative expenses.  The current excess funds are invested in special, non-negotiable government securities held by the trust fund.  If the fund begins to run a deficit, where benefits paid out exceed contributions from workers and employers, the Social Security Administration can redeem the securities to cover the deficit. At the end of 2008, the trust fund held $2.4 trillion in accumulated government securities.  According to projections, the trust fund will continue to accumulate surplus funds until 2017, when benefits paid out will begin to exceed revenue paid in. That in itself is not an immediate or grave problem, given the large accumulated surplus.  But it does present

Read More...

U.S. Trade Policy and Declining Manufacturing: Where do we go from here?  By Paul Crist, Aug. 14, 2010 The U.S. economy and the manufacturing sector in particular, face both short-term and long-term challenges.  There is debate about whether government can or should play a role in addressing those challenges, and if so, what are the fiscal, industrial, regulatory, and trade policies that would benefit the stakeholders, which essentially include all U.S. citizens in one way or another. I should acknowledge at the outset a bias toward thoughtfully considered government interventions to guide the economy and trade in ways that benefit American workers and allow them to participate in the gains that accrue from their labor.  There are economic reasons for my bias that have nothing to do with either socialist or altruistic impulse.  That bias in no way means that I favor protectionism or a retreat from global trade, or that government intervention in the economy is always desirable, but there are, I believe, issues and stakeholders that get too little consideration and solutions to structural economic problems that are given short shrift in the name of conservative ideological orthodoxy. There is ample evidence that without adequate and well-designed regulatory intervention in domestic and global markets, capital and political power tends to migrate upward and become concentrated at the top of the economic ladder. We see that phenomenon in country after country, most recently in the U.S.  Concentrated wealth becomes problematic when it undermines social cohesion and a sense of

Read More...

There are three vacancies on the Federal Reserve Board of Governors.  That’s a big deal – maybe the biggest deal for economic recovery you’ve heard almost nothing about in the mainstream press. The economy has been growing for most of the past year, but data from the second quarter of 2010 are showing new signs of a slowdown. Unemployment hasn’t come down, and may be showing signs of inching up again. All this is great news for Republicans heading into the fall elections. Their biggest fear is that voters might see signs of recovery and jobs growth, and scuttle Republican chances for big gains in November.  But how do Fed nominees play into the Republican equation for electoral victory?  The Fed is the only body that can now take serious action to boost the economy.  Thanks to Republican obstructionism, and misplaced hysteria over the short-term budget deficit (the solution is putting people back to work, paying taxes and growing the economy), nothing more will come out of Congress this year. So what better for Republicans than to ensure continued gridlock at the Fed, guaranteeing continued high unemployment at least until after the November elections? Obama has nominated three highly qualified candidates to fill vacancies on the Fed Board of Governors: Janet Yellen, president of the Federal Reserve Bank of San Francisco has been nominated as vice chair; Sarah Raskin is currently the Maryland commissioner of financial regulation; and Peter Diamond is a Massachusetts Institute of Technology economics professor (an former

Read More...

 I didn't write this... but posted it because it is well worth reading! America's System Failure: Only a Wave of Democratic Participation Can Save This Country As welcome as it was, the removal of George W. Bush was not enough to cure what ails us. It goes to the root of our political system. by Christopher Hayes  February 3, 2010 There is a widespread consensus that the decade we've just brought to a close was singularly disastrous for the country: the list of scandals, crises and crimes is so long that events that in another context would stand out as genuine lowlights -- Enron and Arthur Andersen's collapse, the 2003 Northeast blackout, the unsolved(!) anthrax attacks -- are mere afterthoughts. We still don't have a definitive name for this era, though Paul Krugman's 2003 book The Great Unraveling captures well the sense of slow, inexorable dissolution; and the final crisis of the era, what we call the Great Recession, similarly expresses the sense that even our disasters aren't quite epic enough to be cataclysmic. But as a character in Tracy Letts's 2007 Pulitzer Prize-winning play, August: Osage County, says, "Dissipation is actually much worse than cataclysm." American progressives were the first to identify that something was deeply wrong with the direction the country was heading in and the first to provide a working hypothesis for the cause: George W. Bush. During the initial wave of antiwar mobilization, in 2002, much of the ire focused on Bush himself. But as the

Read More...

ScienceDaily (Feb. 24, 2010) — More intelligent people are statistically significantly more likely to exhibit social values and religious and political preferences that are novel to the human species in evolutionary history. Specifically, liberalism and atheism, and for men (but not women), preference for sexual exclusivity correlate with higher intelligence, a new study finds. The study, published in the March 2010 issue of the peer-reviewed scientific journal Social Psychology Quarterly, advances a new theory to explain why people form particular preferences and values. The theory suggests that more intelligent people are more likely than less intelligent people to adopt evolutionarily novel preferences and values, but intelligence does not correlate with preferences and values that are old enough to have been shaped by evolution over millions of years. "Evolutionarily novel" preferences and values are those that humans are not biologically designed to have and our ancestors probably did not possess. In contrast, those that our ancestors had for millions of years are "evolutionarily familiar." "General intelligence, the ability to think and reason, endowed our ancestors with advantages in solving evolutionarily novel problems for which they did not have innate solutions," says Satoshi Kanazawa, an evolutionary psychologist at the London School of Economics and Political Science. "As a result, more intelligent people are more likely to recognize and understand such novel entities and situations than less intelligent people, and some of these entities and situations are preferences, values, and lifestyles." An earlier study by Kanazawa found that more intelligent individuals were more

Read More...

Are Bailouts for the Super-Rich Inevitable? Ask Paul Krugman “There’s every reason to believe that this will be the rule from now on: when push comes to shove, no matter who is in power, the financial sector will be bailed out.” Paul Krugman, 3/29/10 “The recovery of big banks not only benefited bankers. It also created huge paydays for hedge fund managers, with the top 25 taking home an average of $1 billion in 2009.” New York Times, 4/1/10 Paul Krugman, the Nobel Prize-winning economist and influential New York Times columnist, says Wall Street institutions have become so big and powerful that they will never be allowed to fail. The only hope he sees is to regulate them thoroughly. He greatly prefers the stricter rules now being offered by Barney Frank in the House to the softer ones coming from Chris Dodd in the Senate. (Neither bill truly tackles the derivatives casino.) Krugman criticizes Senate Republican leaders who portray proposed bank regulations as just another Wall Street bailout. In fact these hypocritical leaders are doing all they can to thwart the Obama administration’s modest reforms and befriend Wall Street, hoping to net some cold, hard political cash from the bankers. Unfortunately, when Krugman says bailouts are inevitable, he’s handing the government haters another round of ammunition. “See, the liberal/pinkos are going to just keep on bailing out Wall Street,” they piously intone. But, why isn’t Krugman calling for an end to all financial bailouts for the wealthy, instead of announcing

Read More...

Obama’s Foreign Policy: What approach now? By Paul Crist Since taking office, President Barack Obama has had to grapple with an endless list of thorny issues, but few areas of policy are more of a minefield than foreign policy.  In the Middle East, Asia, Latin America, and elsewhere, he faces challenges that defy solutions.  Two hundred years of history provide him with role models and approaches that should guide him through the global minefield he faces.  But who should he emulate to ensure a successful foreign policy?  What foreign policy philosophy most closely resembles his basic instinct?  Which constituencies will support, and which will oppose, the policy choices he makes?  And what are the domestic political implications of the foreign policy choices he makes? American foreign policy through the centuries has been characterized by four fundamentally different philosophies that can be traced to four great historical figures: Alexander Hamilton, Thomas Jefferson, Andrew Jackson, and Woodrow Wilson.  Hamilton favored a realist policy that included a strong national government, powerful military, and the promotion of American business and economic interests through strength and engagement.  It was Hamiltonian realism that kept George H. W. Bush from pursuing Saddam Hussein in the first Gulf War.  Bush Sr. was tempted by the goal of toppling the Iraqi regime, but his strong realist instinct prevailed, understanding as he did that the political and human costs were too high.  Mocked for his frequent use of the term “prudence,” Bush was, in fact expressing a Hamiltonian, clear-eyed calculation

Read More...