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 capitalist democracy the end point?

In 1989, Francis Fukuyama brought that question to the fore with his essay: 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 that history is more fickle than predictable. With the rise of Putin's autocratic rule in Russia along with socialist China's rise to a global economic powerhouse, liberal democracy, is not only challenged, it is doubt. At the end of 2007, the world witnessed the onset of the Great Recession and eight years later there still lingers an uncertainty just how history will play out.

As such, the historical battle between capitalists and Marxists is again in play. And it's  just not the reemergence of the Cold WarPutin's forays into the Ukraine, socialist China fortifying the South China Sea, and a renewed arms raceit's that this time around judgment day is at hand. And Marxists are claiming the high ground; letting us know that Marx was right!  And, admittedly, things don't look good; as a last resort, the West has called back Keynes, the so-called master, to fix things, to give capitalism a shot of adrenalin; and it doesn't come cheap. Yet, given the pessimism that hangs in the air, Keynesianism is not only loosing traction, it is losing credibility as the threat of another global recession is in the wind; a mood of uncertainty and agitation hangs over the global economy.

 So, is Marx right? Given that we live in a MAD world that kind of
negates Marxism. If the global economy collapses there is no revolution; only chaos, martial law and DEFCON I: don't mess with us. So hunkered down in their nuclear fortresses, what rises from the wreckage is a quasi-Orwellian world where power for the sake power rules: the eternal rule of Big Brother.

Even without that scenario, what we are witnessing is ideological failure across the board. And that's a good thing. Keynesianism aside (for the moment), capitalism and Marxism are matter over mind theories; both of which have put their faith and our fate in the hands of the marketplace(god); different prophets who had divined its will:  that history is determined, and no matter which way it goes, we are just bystanders. Well, those conservative ideas fly in the face of freedom; define here as the freedom to consciously, coherently and purposely meet the challenges impose on us by our very being . So, all things considered; it's time for a paradigm shift: a conscious turn to practical reason: self-determination; the end of history ideal. And since all practical endeavors begin with a plan; the beginning of the end of history begins with a plan; a plan B.

The plan is simple enough, we just do what we need to do. The problem is: these matter over mind ideologies have corrupted the thought process to the point where most people, while functional in the marketplace, can't think outside of their respective political

That's fine for Marxists, but it is the death for democracies: without objectivity, to see things how they are, we are lost. All you have to do is look at the status quo: our house is not only divided, but democracy is disintegrating; we're losing it. So, to get it back, we have to be better informed. So, what follows is a brief review of history to point out some things you may have missed along the way; and that means clicking on the links and doing your homework. But first things first: peeking inside the box.

On the right, the Republican Party's core mission is to maximize the welfare of corporations. Towards this end they peddle a false consciousness and lures the susceptible: the befuddled, the prejudiced, the disgruntled,  and the fearful to their causeit's blacks, Mexicans, Muslims, gays, white godless liberal socialists commies, environmentalists, hippies, and so on and so forth, who are killing our nation. And while Party leaders may embrace the propaganda, the capitalists, their paymasters, don't really care; all of the above are consumers. What they care about is your vote. What they care about is maintaining power, what they care about is accumulating wealth; it is the first law of capitalism. And so far, it's all good: the golden rule of capitalism; those with the gold rule.

So, while they have created a whole industry towards this end,
rewarding conservative high priest economists, politicians, think tanks and those who partake in a mass media blitzall cogs and wheels within a propaganda machine that constantly cranks out a distortion of facts to suit their narrativethey reward those workers who support them with lower wages. And by the way, don't forget that government is the problem and they are the solution... never mind that under Clinton, the left turned to the right, and embraced neoliberalism that is in play up to this day; there is no move to socialism, there is no economic divide between the parties.

There is, however, an emerging divide within the Republican Party. That propaganda machine that produced a flock of parrots; they were radicalized to the point where a demagogue could step in front of that base, seize control of the party; even while campaigning against the marketplace god. That's a big problem for mainstream Republicans since they worship that god; a god that keeps everything in balance. Take that away and they are stripped of their ideology; for them, Trump is a problem; he has single-handedly killed that god. Oh, what a tangled web...

Then, there are those liberals with their live and let live policy... you know, where the golden rule rules. A leftist party standing shoulder to shoulder with our liberal founding fathers; a liberalism that was again affirmed by President Lincoln and every time you pledge
allegiance to the flag: one nation under God, indivisible, with liberty and justice for all.

There's all that, except for the fact that the Democratic Party, since Clinton, has ruled from center right; embracing neoliberalism. So, given the angst and uncertainty that prevails, neoliberalism is out, trade agreements are out, and the welfare government back in play. But in reality, there's is no enlightenment; it's just the return of the shepherd tending to the needs of the flock. Paymasters and parrots, shepherds and sheep: democracy in America.

Meanwhile, here's the rub: it's still a MAD world out there, our house is divided, and we're all headed towards the abyss. So, the task at hand is to better inform the people, get our house together; and who better to do that...  than 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 increasing productivity, constantly increasing the amount of goods offered in the marketplace which therefore requires an ever-expanding market for those goods: a world 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. Thus, when these factors reach a wow point (when everything is just so cheap), now is the time to 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. So, it's all good, it's just part of the business cycle. So, don't worry your pretty little heads about it. 

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, at some stage in history, will reach a critical mass, whereby used and abused 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, stupid goes out window; no one 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. However, in the face of rising angst and uncertainty the truck is not only slowing down, but shifting into reverse. So, why is that? What's wrong with that Keynesian thing?

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 global commodity boom that pulled world out of the Great Recession.  

But back to that overproduction thing: there was a population restraint on the number of new cities that could be built, and once they reached those limits, the construction boom came to a crawl, and the global economy began to slow down.  And that 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, not so much in aiding and abetting their rise to a global power, but that in so doing they tipped the scale and unbalanced the global economy.  A disconnect between supply and demand that should have led to a global recession as unemployment rose in ratio as jobs were offshored creating an escalating demand shortfall and so 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, the prevailing uncertainty, and no more booms, 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; but not so much from the European Union. Here member nations 
can fiscally stimulate their economies up to a point. 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 as demand wanes. But the thing about demand, is that you can import it. This is critical for industrial nations; that's because as they industrialize and urbanize, their populations stabilize and growth stops, impacting housing, infrastructure, consumption, and taxes that impact debt and social security. So, Europe imports more workers; North Africans, Muslims... whatever is on the marketplace table. So, given that, it wasn't so unusual to allow the influx of displaced refugees into Europe which gave a little bump to its economy.  Nonetheless, the Union remains unable to add demand to the global economy, and that doesn't mode well since the European Union is the world's second largest economy.

Meanwhile, other 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 continuously called on nations to do more; come on, we're dying here.

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 a bad policy, its crazy as well. So the question remains: why the shift? What changed? Obama became president; a black man in the White House... that was cause for a tea 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 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 one; 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 problem is, if the game goes south, 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 low interest cash, pretty much, outside of those wacky stock markets, just sits idle.

Meanwhile, back at the ranch, central banks are just about out of ammo; leaving them with one last shot, or in this case one last drop: helicopter money.  And while throwing money into the wind will definitely increase demand, a lot would still find its way to China.
And so the global economy remains unbalanced and continues to wobble on its axis. But the question remains: why the shift to socialist China in the first place? True, there is the global market, the quest for new markets, but still history needs to be put in perspective.

So, looking back, it begins with World War II and the destruction of a large portion of global production vis-à-vis Germany and Japan. And given that post-war they were respectively within the sphere of influence of socialist China and the Soviet Union, the U.S. took them under its umbrella and aided them in rebuilding their economies. That, along with the reconstruction boom that followed the war created huge global demand which 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.

So, following the chain of evidence, as they penetrated U.S. markets,
its trade surpluses began to decline and an outflow of 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; all of which leads to a recession.

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, 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; the demand for petro dollars strengthen the dollar making their exports more expensive, and that, along with the loss of market share led to a
corresponding loss of profits.

There's a lingering question in the above, just how do we export dollars? So, let's take a little pause and add some clarity. Simply said, banks manufacture money. So, understanding that, when someone goes to a bank and deposits their money (which could be a check, the currency of banks) it is so noted on the books as a liability. And when they lend that money, it's an asset and the books are balanced. So, money mostly exists as bookkeeping entries. And that's problem if too many depositors, for whatever reasons, need some cash; banks recall loans, depositors panic and recession follows. That reality led to the creation of the Federal Reserve System, the central bank that can juggle the books and so underwrite the commercial banks.  The point is we just manufacture money that underwrites the system. So, in that sense we're exporting dollars, petrodollars.

Anyway, 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 economics.

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 NAFTA into law and then proceeded to grant socialist China most favored nation status paving its way into the World Trade Association.  And with that, the door to the Promised Land was opened. They now had access to the world's largest pool of cheap labor and the world's largest market. So, the
multinationals (the highest stage of capitalism, self-interested entities), set sail for China; leaving 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. So, back to those events that put off the day of reckoning.

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 all that goes with it: more housing, more infrastructure, more pizza parlors and more tax payers. 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, Trumpism has captured the hearts and minds of the Republican base and so captured the nomination. Meanwhile on the left, the Democratic Party has turned back to liberal economic populism: feeling the Bern. But people (left or right) 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...  the abyss still beckons and nobody has an answer.

There is that; but there is also that last option: helicopter money, aka money-financed stimulus policy. It's pretty much like manufactured money; it still keeps the wheels of commerce spinning, except that there's no added debt.

The question is: are we reaching that point where we should seriously consider that option? The short answer is yes; sooner is better than later, because latter could be too late. Enter plan B.

Right now the global economy is unbalanced, and so the first thing
that comes to mind is how to use that money to rebalance the global economy; how to bring manufacturing jobs back home. Yet, even if we did figure that out, it would only lead us back to overproduction and all that goes with it. So the plan itself must put forward an end of history end point and endgame that gets us there.

There, the end point, is a confluence of technological factors that has brought about the universal self-sufficiency of nations: moving agriculture indoors, lights out factories, and renewable energy independence. And being independent, they can do whatever they want. And since money is no problem and nations are self-reliant, they can fund their governments, social security, health care, education and guarantee a minimum standard of living. Here, the historical evolution of the industrial/military/entertainment complex, has been pretty much reduced to an entertainment economy wherein you are free to pursue knowledge, entertainment skills, work on your golf game, travel and explore the world; ideally to reach your full potential as a human being. Yes, you still have to earn your keep, and you are still somewhat limited to what you put in the pot; but really, if there is any problem, it's one of your ability to entertain yourself. Think of this as Part I.

Part II, is that along the way, as third world nations work their way to self-sufficiency, as they industrialize and urbanize, their populations eventually stabilize, which means the demand for resources will stabilize.  The question is: does this all mean the economic problem is solved as well as the political problem? If the answer is yes, then we have reached the end of history; no more wars and no more economic ideological conflict and thus a sustainable world. So, how do we get there?

We already know that money is no object. That's the means, but the way is no object either, the world just gets together, gathers the best minds at a newly convened Bretton Woods wherein they hammer out the details for a world transitioning to the universalization of self-sufficient nations. Essential to their task would likely be: across the board 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 export the means of production to third world countries. And, since it is still a global economy, in the interim, it will be necessary to come to terms with trade deficits. Meanwhile, industrial nations can agree to agree on some things like debt and energy; a grand bargain wherein they neutralize currency markets as they all use helicopter money in a practical manner.

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 bulk 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 industrial nations can subsidize the poorer. How so?

Assuming that tariffs are out, since they only interfere in the transition, 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 a progression of wage subsidies: algae fuel, an eventual leveling of the playing field for domestic producers of steel, copper, aluminum, and rare earth elements  (necessary to rebuild our industrial base and infrastructure; a fundamental step towards self-sufficiency), and factory workers. The progressive net effect is the lowering of prices domestically that in turn, lowers the cost of 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, and everyone that wants a job has one. Here, if you want more, you upgrade your skills; there are industry gradations for subsidies, you'll get by, but to get more, you're going to have to earn it.

However, getting there isn't done in one great leap; everything is done at an orderly pace. Not only as it relates to infrastructure and energy but to the transition itself that will take decades. And here, the narrative comes to an end.

The proposal has been put forward, and now is the time for
discussion. But still, the message is clear: It's all about agreeing to agree. And when it comes down to it, we can agree that what everyone wants is a roof over their head, food on the table, the amenities of life; and most of all...  is  some peace of mind. So, to sum up: once we agree to agree, that is the beginning of the end.

Reprints are granted, just retain the byline.