Sunday, March 6, 2016

Plan B and the End of History


Walter Libby

The end of history is a political and philosophical concept that supposes that a particular political, economic, or social system may develop that would constitute the end-point of humanity's sociocultural evolution and the final form of human government.
The question is: are we there; is liberal democracy the end point?

In 1989, Francis Fukuyama brought that question to the fore with his article: The End of History? Based on changes occurring within the Soviet Union and communist China he proclaimed: What we may witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind's' ideological evolution and the universalization of Western liberal democracy as the final form of human government.

Well, it turns out history is more fickle than predictable. The rise of Putin's authoritarian rule in Russia and socialist China rocketing to a global economic powerhouse has challenged Fukuyama's end of history paradigm: that liberal capitalist democracy is the only game in town. So, since it's not, the question mark remains; history is still up in the air.

So why is it? Well, the thing is, all this talk popped up when the global economy fell into the Great Recession. And to fight that recession, Keynes, the so-called master, was called back into the game. Yet, given the pessimism that hangs in the air, Keynesianism is not only loosing traction, it is losing credibility as fears of another global recession continues to mount. And since the game is the historical ideological battle between capitalists and Marxists, the game, again, is afoot. And given the uncertainty hanging over the global economy, Marxists see history going their way.

Well, maybe so. But while Marx based his theory on overproduction, he could not foresee changes in the mode of destruction as the
industrial revolution produced industrial age weapons:  nuclear bombs and ICBM's. Nor on a smaller scale see the development of modern armies armed with tanks, machine guns and apache helicopters. So, given all that, revolution is out and a MAD world is in; threatening the end of all history. So, that's on Marx; advocating armed revolution wasn't the answer. And capitalism, they deny free will, putting their faith and our fate in the hands of marketplace(god);  So these theories are out. And when the theoretical fails, what is left is the practical: self-determination. And since all practical endeavors begin with a plan; getting to the end of history requires a plan B.

On one side there is the Republican Party whose core mission is to maximize the welfare of corporations; natural law, the survival of the fittest. On other hand there is the Democratic Party whose mission is to provide for the common welfare; constitutional law.

One peddles a false consciousness and lures the susceptible to their cause. It plays out something like this: I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all... except for blacks, Mexicans, Muslims, gays, white godless
liberal socialists commies, environmentalists, and hippies.  And while conservatives may embrace the propaganda, the capitalists, their paymasters, don't really care--all of the above are consumers--it's just that they need the votes of those they have radicalized; so those with the gold can still rule and fatten the golden calf.

So, while they have created a whole industry towards this end,
rewarding conservative politicians, think tanks and those who partake in a mass media blitz --cogs and wheels within the propaganda machine--they reward those workers who support them with lower wages. And by the way, don't forget that government is the problem and we're the solution... never mind under Clinton, the left turned to the right, and embraced neoliberalism that is in play up to this day. Simply said, these stalwarts of the working class threw the workers under the bus. 

Man, these guys are good. Anyway, given the rising angst and uncertainty, there is a rising populism on the left: where a liberal (live and let live policy; you know...  where the golden rule  rules) Democratic government is the solution; that in spite of the prevailing uncertainty of Keynesianism. Meanwhile, here's the rub: it's still a MAD world out there, and we all are headed towards the abyss. So, the task at hand is to better inform the people, get our house together, and who better then to do that...  but, history itself. So, let's begin at the beginning: the battle between capitalists and Marxists; what's the fuss all about?
It's this: the industrial revolution, as its winds its way through history, constantly advances technology, constantly increases productivity, constantly increasing the amount of goods offered in the marketplace which therefore requires an ever-expanding market for those goods; a global market. And as those producers spread out across the globe in search of new markets, those markets, in search of prosperity, develop their own productive means. And herein lies the problem: eventually there's too much production; supply has exceeded demand, an overproduction of goods that leads to recessions and depressions. So, this is where the battle comes into play; just how are these crises resolved. So, keeping it simple:

Capitalists take the what me worry view: recessions and depressions aren't so bad. The marketplace, in and of itself, self-corrects: during recessions interest rates fall along with the prices of commodities; especially the price of the all-important commodity: the price of workers. So, when these factors reach a wow point (when
everything is just so cheap) that sparks producers to get off their asses and get back to business. It may be slow going, but in the long term, equilibrium is reached; supply and demand are brought back into balance. It's just part of the business cycle. A self-correcting marketplace; it doesn't any better than that. So, don't worry your pretty little heads.

In the Marxists' view that's just stupid; no one gets back in the shoe business when prices are low; when demand is low. The reality is that fewer workers leads to less demand and less demand leads to fewer workers; a self-perpetuating  cycle that eventually, at some point, will reach a critical mass, whereby stressed-out workers rise up,
overthrow the capitalists and once they've got ahold of the productive reins, they establish a workers' utopia; from each according to ability, to each according to need. How can you top that? No more worries.

The thing about capitalism, that self-correcting thing, is that the correction happens in the long term. So, in reality, when its tested, like by the Great Depression, and now with the Great Recession, no rational person thinks about the long term, because in the short term there's rising angst and uncertainty and pain and suffering; both for workers and businesses.  So left or right, governments step in, borrow and spend while central banks lower interest rates. More
demand and lower borrowing costs induce the supply-side to get back in the game. In turn, to meet that demand, they hire more workers who create more demand. And to meet that demand they hire more workers. And with a shrinking supply of labor, wages are bid up.  And with higher wages and lower interest rates they buy new cars, homes, this and that, and send their kids to college. And before you know it, the economy has returned to equilibrium, supply and demand are in balance. It's a Keynesian thing; a practical adjustment to the supply-side. And once adjusted, Keynesians step aside; until the next time. So, in a sense, reason has entered the game, and thus the ideal is now: liberal free market/Keynesian democracy; history keeps on trucking.

So...  how is that Keynesian thing working out? Actually it was more of a Chinese thing. In response to the Great Recession they initiated their own stimulus plan: setting off to build hundreds of new cities. And to do so, they turned to the world for the necessary resources, and so set off a commodity boom that pulled the world out of the Great Recession.  

But back to that overproduction thing: the supply of new cities eventually exceeded demand, the construction boom came to a crawl, and the global economy began to contract.  Which brings us back to that Keynesian thing: balancing supply and demand. It went out the window when multinationals offshored our manufacturing jobs to socialist China, not so much giving them the wherewithal to build those cities, but that in so doing tipped the scale and unbalanced the global economy; a disconnect between supply and demand that should have led to a global recession as unemployment creep rose in ratio as jobs were offshored creating a demand shortfall and so and an eventual supply-side crisis in China. However events (the boom and the housing boom) put off the day of reckoning. So, with the collapse of commodity prices, and no more props, we can reckon we're there. And being there, just how are things, economically and politically, playing out?

So, back to that go to guy: Keynes. He's barred from the Eurozone. That doesn't mean that member nations can't fiscally stimulate economies, they can up to a limit. And if they blatantly exceed those limits, like Greece, they have austerity measures imposed on them to bring them back in line with those limits.  So, all in all, it's not a good thing for them or the world; since it is world's second largest economy, and it is out of the game.

Meanwhile industrial nations immediately responded with fiscal and monetary polices. In testimony to the seriousness of the crisis, the IMF, despite its conservative past, jumped on the bandwagon, and pleaded with those nations, that could, to ramp up their fiscal policies. 

However, that wasn't a problem in United States until it became one. Initially there was immediate nonpartisan support for Bush's stimulus act. Yet, suddenly the Republican Party turned to austerity and opposed further infrastructure projects. Was that just a return to fiscal conservatism, being responsible actors? If so, it was the wrong place at the wrong time. Taking demand out of the game is not only not a bad policy, it's crazy as hell. So the question remains: why the shift? What changed? Obama became president. And that was intolerable for the white-wing of the right-wing party. So, the memo went out: No matter what, you can't make this guy look good; as a matter of fact, everything going south is his fault.

So, the Republicans in the House and Senate rejected en masse
Obama's Recovery Act. And failing here, they continued to obstruct infrastructure spending bills. However, on the cusp of Obama's last year in office, they did pass an infrastructure bill; go figure.

But despite their antics, it seemed like America, while not doing great, is getting by. So the Fed took a baby step towards normalizing interest rates. However, with rising global angst and uncertainty, they have gone back to a wait and see game. The thing is, if the game goes bad, if deflation continues its downward spiral, it, and other central banks have pretty much run out of ammo

What that means, given an unbalanced global economy, is that they  were essentially firing blanks: quantitative easing (increasing the quantity of cash in banks) and negative interest rates does little domestically since demand is largely being met by socialist China. So, all that cash, pretty much, just sits idle, all dress up, and nowhere to go. Well, except to those wacky stock markets.

So, central banks are just about out of ammo; leaving them with one last shot, or in this case one last drop: helicopter money (a paradigm shift).  And while that will definitely increase demand, it still shifts
a large portion of demand to the supply-side; the global economy remains unbalanced, continues to wobble on its axis, and so continues to threaten the global economy.  But the question remains: why the shift in the first place?

It begins with World War II and the destruction of a large portion of global production vis-à-vis  Germany and Japan. And given post-war they were respectively within the sphere of influence of communist China and the Soviet Union, instead of leaving them to languish, the U.S. took them under its umbrella and aided in them their reconstruction creating huge global demand that led to the golden age of capitalismAn age that came to an end as Germany, Japan and others came back on line and set the world back on a path to overproduction; setting off a chain of events that changed the dynamics; the status quo.

So, following the chain of evidence: as they penetrated U.S. markets, its trade surpluses began to decline and an outflow dollars began to pile up in Europe leaving it with three options. One, use those dollars to buy their own currencies maintaining a fixed exchange rate; or exchange them for U.S. goods; or take them to the U.S. gold window. Considering that they were competing with the U.S., they opted to redeem their dollars in gold.  In response Nixon closed the window, took the U.S. off the gold standard that in effect ended the Bretton Woods agreement leading to a floating exchange rate; currency markets were given free rein and a glut of dollars led to its devaluation. And that's not a bad thing; it now takes fewer dollars to buy American goods giving domestic producers an economic edge in global markets. On the other hand, it takes more domestic dollars to buy foreign goods. So why is that a problem? It's because the price of oil imports would rise; and that's a bad thing as it costs more to fill up your gas tank, leads to inflation across the board that in turn drives up the costs of exports.

In response Nixon cut a deal with Saudi Arabia: arms and protection in exchange for denominating the sale of their oil in dollars. That led to the rise of the petrodollar.  And with it the U.S., faced with rising global competition, was now sheltered from currency markets.  And so sheltered, could continue to run constant and rising trade deficits. That itself, in a bizarre way, took the edge off of overproduction. Europe and others could continue to produce and export goods to the U.S. who in exchange would export dollars necessary for the purchase of oil. But taking the edge off of overproduction meant that U.S. producers had lost their edge and their mojo; a strong dollar, the loss of market share and so a corresponding loss of profits.
While postwar Keynesianism was the reigning paradigm in the golden age, that drop in profits led to a resurrection of unfettered free market ideology; the awe and wonder of the marketplace(god) that kept everything in balance. Keynesianism was out and free market ideology was back in play (from the New Deal, back to the old deal); this time around with the moniker: neo-liberalism; new in that it that it was buttressed by supply-side theory; aka trickle-down theory.

Either way, the ideology was in place, and so set the stage for the Reagan who the set the stage for NAFTA.  Go Figure Clinton kept the neoliberal ball in play by signing into law NAFTA and then proceeded to grant socialist China most favored nation status paving its way into the World Trade Association. The rest is history. The capitalists, the puppet masters, solved the overproduction problem by outsourcing our manufacturing jobs and the American dream to socialist China while reaping huge profits. Yet in doing so they
destroyed their economic rationale: that the marketplace is self-correcting.

It's not so much that workers in the U.S. must be willing to accept wages below or at parity with those workers in China. It's that when multinationals (the highest stage of capitalism, self-interested stateless entities) offshored manufacturing and/or assembly
jobs to China, it became the so-called factory to the world. Yet as they sailed to China they left in their wake rising unemployment in their respective countries creating a global disconnect between supply and demand which should have led to a global depression, financial collapse and global anarchy as the affected nations demanded less from China who in turn would demand less from the world who in turn would demand less from China. The day of reckoning, however, was put off by past events.

Following the collapse of the bubble and a mild recession, the thinking at the time was: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." Greenspan obliged by pushing interest rates down and Bush pushed the home ownership society.

Yet the housing bubble wasn't limited to the U.S., it was a global housing bubble; and when it popped the world fell into The Great Recession. And while the response is already given, there are other factors to consider. One, the petrodollar had morphed into the petro/commodity dollar allowing the U.S. more latitude in running trade deficits. Deficits, that in turn became an engine of growth as imports are unloaded and distributed by trains and trucks to retail outlets that all together employs millions of consumers. Added to that is the influx of immigrants (legal or otherwise) that increases
population growth and so increases our GDP: more housing, more infrastructure and more pizza parlors. Taken together, it is the American consumer that is the engine for what global growth there is. This is why the U.S. is seen as the lone bright spot in the global economy; nothing more, nothing less. 

So, here we are, out of props--the boom, the housing boom and the China boom--and out of ideas. And the status has changed... for the worst.

It's not so much the rise of Trump, but that the Republican propaganda machine had radicalized its base to the point where a demagogue could step in front of its base and seize control of the party while exposing the dark side of their creation. And while they are just shocked by this turn of events, more to their dismay is that Trump is running against the marketplace god: the Republican Party is self-destructing. Well, O.K., that's not so tragic.

Meanwhile on the left, there is Obama turning from Keynesianism to neoliberalism, throwing new trade pacts on the alter of the marketplace god. So, there is again a turn to liberal populism: feeling the Bern. But people are also feeling the pain: the uncertainty and the wolf at the door. For them, the candidate that is surging in the polls is none of the above. Nobody for president.

So, here we are: the abyss still beckons and nobody has an answer. So what happens if the global economy collapses; it could go something like this. And when something like that happens, something like this could happen: a military coup; the rise of a military dictatorship; the rise of Big Brother.

So, what could happen in China and Russia? In thinking about that, you have to remember that China's rise happened concurrently with the fall of the Soviet Union which led to Fukuyama's end of history thesis. Was it a mere consequence or act of deception? If was an act of deception, it certainly seemed unnecessary; China was the Promised Land: the world's largest market, the socialist government pitching cheap labor, fewer regulations and somewhat
lower taxes; what could keep them out?

So, why allow the collapse of the Soviet Union? A couple of reasons come to mind. When the global economy collapses, those former Republics would be just another mouth to feed (think natural gas and oil) and Russia when it comes down to it, is all about Russia. So, there's that and than there is The Art of War: the art of deception; wherein the supreme art is to defeat the enemy without fighting.

Which brings us to Socialism With Chinese Characteristics. In 1984, Deng Xiaoping announced to the world that socialist China was opening its trade door and taking the capitalist road. This was because at its inception, when it overthrew the existing order, it inherited from the old China a ruined economy with virtually no industry. Which in their communistic fervor they overlooked. You rise up and overthrow the existing order when it has developed the stage of production to the point to where you can seize the mode of production, get ahold of the productive reins, and then distribute to each according to need. So, simply said, socialism in China  was failing to build up its productive capacity and so failed to deliver the goods. Thus, with Mao's (an anti-capitalist roader) death, Deng was brought back from exile, and opened its trade door to the world while sticking to Marxism while sticking it to the capitalists. Socialism then represents that stage of development, the primary stage where capitalists hand over the mode production. And as Deng summed it up: Well, those are our plans... to capture the mode of production without firing a shot. It was a hell of plan, and the Soviets jumped on board. And today they are the best of buddies.

Well, today, socialist China is pretty much there (go figure).  So come global crisis Socialist China moves from socialism, to each according to work performed), to communism (from each according to ability to each according to need.  So, those in need simply move up to the east side, to a nice apartment in the sky with all the amenities. And
Russia having distanced itself from the West under the guise of the Ukraine conflict has turned to autarky. But self-sufficiency takes place in the long term. So, in the short term, Russia has oil and China consumer goods, a tit for tat trade agreement. And while they don't as yet have a new silk road they do have the Trans-Siberian Railway and the Trans-Siberian oil pipeline. 

Is this all a bridge too far, overreaching? Could be, but it's just extrapolating from the fact that they are Marxists. And even if they succeed in their quest to overthrow the existing order, they've only succeeded in a MAD world. And in such world all players hunker down in their nuclear fortresses where power for the sake of power becomes the rule; and who rules here? Big Brother.

So back to the beginning: capitalism and Marxism, ideologies that are based on economic determinism; either capitalism self-corrects or it self-destructs; either way, history is written. And either way, we have surrendered our freedom. And to those who think they can keep things in balance; they have deceived themselves and so deceived their followers. So, here we are, a step closer to the abyss. So, for your perusal: Plan B: Shifting from the theoretical to the practical: the rise of practical idealism; the rise of self-determination.

In the United States the first thing that comes to mind is to
reindustrialize and do our part in rebalancing the global economy.
But since that would just lead us back to global overproduction, the plan must posit an end of history end-point and an endgame that gets us there.

There, is the universal self-sufficiency of nations. And once there they are immune from currency markets and so have gained full monetary independence. As such, individual nations, via the printing press, can fund their governments, social security, health care, education and guarantee a minimum standard of living. When that day arrives we'll have reached the end of history; the end of ideological conflicts, the end of wars: the struggle for markets and resources. Meanwhile, robots will have taken over production (the cherry on the cake), global populations will have stabilized (as nations industrialize and urbanize, their populations tend to stabilize) and that, along with recycling will lead to a sustainable planet. So, how do we get there?

The shift to a new monetary paradigm:  helicopter money; better said as money- financed fiscal stimulus. That's the means but the way is pretty much determined by a gathering of the best minds at a newly convened Bretton Woods. Essential to their task would likely be:
fixed-exchange rates; loans, interest rates, repayment schedules for developing and underdeveloped countries; balancing the rate of growth in sync with the production of resources; coordinating the roles of the industrial nations as they assist third world countries on the path to self-sufficiency and, since it is still a global economy in the interim, coming to terms with trade deficits. Meanwhile, nations can agree to agree on some things like debt and energy. 

For example: with the money-financed stimulus policy in place, the Fed directly deposits a monthly check (to cover ongoing expenses) into the Treasury's checking account and the Federal government takes that stimulus money and subsidizes Social Security and Medicare, the mandatory payments that make up the lion's share of our budget, to the degree where deficits are eliminated and surpluses are created. Those surpluses can then be used to eliminate taxes for the bottom tier of workers, fund needed infrastructure projects and even give a bump to Social Security benefits to those in need.

Moving on, we have to move beyond oil. Here, it would be hard to argue for anything else outside of algae fuel as the go to biofuel.  So cash in hand, the government subsidizes its production (including labor) to the point where it is competitive with oil. So, as we wean ourselves off oil to power our cars, trucks, trains and planes it puts us on path to energy independence that leads to a corresponding decrease in greenhouse gases, increased employment and global trade.

Next we turn our attention to the shift from the interdependence of nations to the creation of self-sufficient nations. Assuming the IMF and Bretton Woods II have worked out the details, it could go something like this; as the U.S. reindustrializes, it is just not about gearing up production for the home market, it's also about gearing up its capacity to export the mode of production to the developing and underdeveloped nations. And in some sense the rich nations can subsidize the poorer. How so?

There is no way the affected nations (those that lost supply to China and elsewhere), particularly the United States, are going to reindustrialize, to reach self-sufficiency, without global wage parity. And the only way that can be achieved is through wage
subsidies: lowering prices domestically that in turn, lowers the cost of their exports. And what works for the U.S., works for everyone. All in all, not a bad thing; prices remain down and consumption remains high.

However, getting there isn't done in one great leap. It is an incremental process. It's done in stages: algae fuel, debt, a progression of wage subsidies (leveling the playing field for domestic producers of steel, copper, and aluminum and rare earth elements necessary to rebuild its industrial base and infrastructure; a fundamental step towards self-sufficiency) and then, a paced effort towards universal national self-sufficiency.

And while America, as it spans a continent, can easily turn to self-sufficiency, other nations not so endowed will have to follow the example of the Eurozone with an enlightened central bank that subsidizes development in their member nations. That may be a problem for the Middle East. But when it comes down to it, what everyone wants is a roof over their head, food on the table, the amenities of the marketplace, and some certainty in their lives. But still, there is the certainty of global warming; specifically its impact on global droughts. How do we deal with that? There's a practical solution here too. But first we have to agree to agree.

And thinking about that, once we agree to agree, that could be the end of history ideal, the end of capitalism and Marxism whereby history is something that happens to us, and where we start to write our own history.

Scroll down to post a comment.