A bad day for whom? The Left for one

 

I blink, you lose!

Will Rogers supposedly said that he was not a member of any organized political party. He completed that noting he was a Democrat. That feeling is alive and well among Dems. The confusion caused by Biden's withdrawal seems to have led to many peculiar views among pundits and public intellectuals. Two typical reactions are the ones that are certain that Biden would have lost, and now with Kamala the election is in the bag, and the ones that suggest that the lefties in the party were wrong in supporting Biden. It's true that Biden was trailing in the polls, but it is unclear that he had already lost (although the chances were high), and even less that Harris will win for sure. I hope she does, to be clear, given the alternative.

But it seems only reasonable to assume that dropping the incumbent that, at least on domestic issues, presided over a fast recovery, and one that has favored those at the bottom of income distribution, is a bad idea (if he was to drop because of his cognitive issues, which were known, that window probably had closed in March, same date as LBJ stepped down, as some connected with the party had hinted). He was clearly pushed aside by donors, backed by the party establishment. And now Dems will have to defend the record, but also suggest that the person behind that record was not up to the task of running the campaign (not to mention the added problem of explaining how he still remains in the presidency, w/o invoking the 25th amendment, which the GOP is obviously going to call for, if they already didn't).

 

Blame the left, a winning strategy

As noted, the other common reaction was to suggest that Bernie, AOC and others in the Squad were completely wrong in supporting Biden, and, even with significant differences (and not just on foreign policy), thought that he was the best candidate. It is evident that Bidenomics has been reasonably good because he veered to the left, approved a large fiscal package, contrary to Summers and others associated with the party establishment, and that saved the economy from a recession. To some extent that was the legacy of Bernie's two runs for the presidency. He pushed the party to the left. The internal coup carried by donors and the establishment basically will move the party back to the right. One may dislike Bernie's views on this, but they are perfectly rational.

Finally, now the NYTimes and most party insiders are lionizing Biden as a selfless martyr for democracy. But if Harris loses in November (and again I truly hope she doesn't; as I noted Trumponomics will be much worse) he will be hang out to dry by the establishment and the media. He will be seen as responsible for the defeat, for his stubbornness and delay in leaving (and even, perhaps, for the inflation he caused with his fiscal plans; again, just to make sure, the latter is ludicrous). This is a defeat for Biden, and inevitably for his allies moving the party to the left.

Long ago, in 2016, before the election, I suggested that the results would be closer than they should be, because of the persistence of the neoliberals within the party. And after the election I noticed that Dems refused to learn that lesson. It seems that we are in the exact same place, with the same dangers as in 2016. The fact that Dems are incapable of organizing a coalition that includes the working class, and are dominated by donors in Wall Street and Silicon Valley is problematic. Hope springs eternal.

PS1: Of all the neoliberal Dem's bad ideas, and their willingness to veer right, the best, by far, was Aaron Sorkin's suggestion that they should nominate Mitt Romney.

PS2: Note that no Republican candidate for president has earned 51% the popular vote since 1988. W got 50.7 in 2004, with 9/11 the war and all. And that was the only time a GOP candidate won the popular vote after 1988. Both Bush in 2000, and Trump in 2016 lost it. And Trump is truly unpopular (but might win). But the fact that is going to be close suggests that the Democratic establishment is also very unpopular. Their refusal to learn and promote candidates like Bernie is not a mistake, it is consistent with their own economic interests.

PS3 (8/18): It seems increasingly that Kamala's chances have increased, and that a Trump resurgence is less likely (not impossible, sadly). In part, that is because she seems to have basically accepted the move to the left (on economic issues) that was promoted by Biden, and that is clear from her choice of vice president, someone supported by Unions, and by Bernie Sanders. A pivot to the left, rather than the middle.

The US and Russia: beware of Neocons and liberals preaching democracy promotion

 By Thomas Palley (guest blogger)

Every week my e-mail box receives a steady stream of articles aimed at cultivating public animus to Russia. The articles are always wrapped in a narrative in which Russia is a threat to democracy in Ukraine, Eastern Europe, and elsewhere. The effect is to create public support for hardline action (economic and/or military) against Russia.

The insidious underside of this campaign is it paves the way for a scenario in which Ukraine provokes Russia, thereby drawing a Russian response that is then used as a pretext for US engagement. In such circumstances, the public would have been primed for action and would almost certainly fail to disentangle the truth.

What is terrifying is the scope of the stream, which spans the spectrum from far-right to center-left.

Read rest here.

Merkel, Scholz, the German Social Democrats and the Meaning of the Left

Angela Merkel is stepping down, and as often happens in these circumstances (or when someone of historical importance passes; see here for my review of Thatcher and Volcker obits) there is a flood of analysis of their contributions. Merkel is no exception, and most 'serious' outlets have suggested that she was a great stateswoman, and that she managed to save the euro (an honor she often shares with Mario Draghi), the European Union and provided leadership in the midst of the vacuum caused by Donald Trump (see here, or here, for example). The newspaper of record, linked there, says that: "Chancellor Angela Merkel steered Europe through crises, and Germany has boomed during her tenure." I kid you not! Yes, boomed. The actual real GDP growth was about 1.1 percent on average during her tenure (as per graph; data from the Conference Board).

Note that there is no acceleration of growth, that has remained low since reunification with Helmut Kohl, and with the brief interregnum of Gerhard Schröder, the center-left (more on that below) leader of the social democrats in the early 2000s. The New York Times suggests, not incorrectly (at least on this) that she leaves many economic problems behind, but argue that those stem from lack of investment in education (the 'human capital' mantra) and on high-tech technologies. Note that investment often follows growth, and that has been anemic in Germany, and productivity follows growth, including in the high tech industries. It is demand driven. Merkel did not create the neoliberal model, but she certainly followed it.

Her legacy should be tied to the euro, and to Greece (I wrote quite a bit on Greece over the years; see here, and in the other blog here starting even earlier in 2010), and there her legacy of austerity, fiscal adjustment, which allowed Germany to maintain fiscal and current account surpluses (the measure of her success, I would guess), is an undeniable disaster. Greece GDP never recovered (see figure below; same source).

In other words, nobody should think that these is something to be emulated. The reason right-wing, photo fascist parties, like some of the craziest stuff that one can see in the United States are possible in Europe is because of the policies that she adopted. Of course, as I noted these policies precede her, and Kohl, the German version of Reagan and Thatcher deserves a lot of the credit, both as instrumental on the unification, which still has important implications for the levels of employment in the ex-Eastern Germany, and the policies that led to the euro. Of course, it took a social democrat, Schröder, to promote the labor market reforms (essentially, more flexible markets, making it easier to fire workers, and providing lower benefits for the unemployed) and a policy of wage compression.

And that brings us to Olaf Scholz, Merkel's finance minister, and the leader of the social democrats (which were in many ways a reference for the left globally at some point in the very distant past), which are uniformly described as center-left (NYTimes here). I will not spend too much time discussing that, but I would note that a left of center government must have policies to promote the wellbeing of the working class, including higher wages and something that resembles full employment. The German Social Democrats are not that. And if Mr. Scholz manages to form a coalition government, it will be with the Greens, which will push for degrowth (on that see this old post), and perhaps with the neoliberal Free Democratic Party, mostly people that have not seen a fiscal adjustment plan they did not like. So Merkel's legacy lives on.

Beyond Laissez-faire? Seriously?

As I noticed, posting will continue a bit slow for a while. So this is a bit old. Noah Smith suggests that the profession is leaning in a liberal, meaning moderately lefty, direction. He tells us, however, that:

"although there’s a growing consensus that something about U.S. economic policy needs to be changed in a more liberal direction, there isn't any consensus on what. Laissez-faire may have reached the end of its shelf life, but we don’t yet know what is going to replace it."

He praises Reagan-Thatcher's policies for their simplicity. I guess Occam's Razor is the criteria here. Not uncommon, as I noted before, that was Krugman's defense of free trade not long ago. He might be right on the lack of consensus on what to do, even though his minimal program from the discontented seems plausible enough, more fiscal expansion, less free trade agreements, higher wages (start with the minimum) and more regulation of finance.

Note, however, that this policy consensus, is open to a lot of dissensus, and not only on details of policy (e.g. more fiscal expansion where, infrastructure, health, defense? Do we increase the taxes on the wealthy too? And so on). The vast majority of those that now defend these policies do it from an essentially unreconstructed marginalist view (mostly New Keynesians). So the policy defense does not stem from different models (Mankiw, a New Keynesian as much as Krugman and DeLong would not endorse any of these 'left' policies), but from their policy preferences. I would suggest that left leaning economists using mainstream models have a harder time showing that their policy prescriptions are coherent with their theory (they need all kinds of imperfections, and ad hoc assumptions).

But that's not the surprising thing in Noah's piece, at least to me. He's nonchalant about the assumption that the shelf life of laissez-faire policies has somehow expired. It is true that Keynes had suggested that laissez-faire was dead long ago, in 1926. But that proves exactly the policy resilience of laissez-faire. In fact, I would argue that the theoretical persistence of misguided (illogical and lacking evidence) mainstream positions often results from the advantage that these models provide for defending laissez-faire.

So laissez-faire is doing fine. And note that austerity is doing fine, in the US, in Europe, in Latin America, and is still being pushed by the IMF in their actual programs (forget the research department suggesting that sometimes it doesn't work; these views never apply to the real world). FTAs are also doing fine, and pushes for increasing the minimum wage or for more regulation of finance continue to be contested and fought back fiercely. We're far from the end of laissez-faire.