Of all the irritations that come with making a living as a university professor, and there are quite a few, the inability to do much in the way of "reading for pleasure" during the school year is at the top of my list. I'm talking minor irritants, mind you. Don't get me started on the major league indignities that come with working in academia. In any event, at this time of year I like to kick back and catch up on some reading: fiction, nonfiction, it's all good.
One item I've been meaning to read for some time now is Canadian journalist Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism. I've read any number of Ms. Klein's essays for The Nation, Mother Jones and other progressive publications. What's more, I've heard her speak on many occasions -- most recently during Democracy Now!'s exceptional coverage of the climate change meeting in Copenhagen earlier this month. However, this is the first time that I've sat down to read one of her books.
It's apocryphal, but the urban legend goes that Albert Einstein was once asked for his opinion of mankind's greatest invention, to which he curtly replied "compound interest." Compound interest, the underpinning of economic exponential growth and an utterly necessary device for the proper functioning of any economy hardwired for exponential growth, the simultaneously simple and devilishly complicated instrument that is the beating heart of the industrialized world.
Every economic transaction we make is colored by compound interest. We borrow a couple hundred grand to buy a house, make a two grand a month payment on it, yet still owe more than a two grand difference between this and the last payment. Why?
At first, I was horrified to learn that Sweden's Royal Academy of Sciences had gone ahead this year and awarded a prize in Economics. That horror abated some when I learned it had been awarded, for the first time ever, to a woman. And it abated more when I understood that she was a faculty member here at Indiana University, a fact that replaced much of the horror with pride.
But what really turned things for me, what allowed that final sigh of total relief, was the revelation that the prize for Economics hadn't gone to an economist at all. IU's Elinor Ostrom is a political scientist.
Why was that important? Because the state of the dismal science is dismal. It's more than dismal, it's dreadful. It's embarrassing.
Hard times are here again, and they touch us all -- losing a job, taking a pay cut or shutting down a small business. Even the massive corporations of the just-released 2009 Fortune 500 feel the pain. Sure, their pain comes in their total profit falling to just $98.9 billion last year -- mere double-digit billions in profitability! As always, the new Fortune 500 list contains an excellent analysis of our current economic condition and the role of America's big businesses in it. And as always, it's pretty embarrassing.
The centerpiece is the list of America's 500 biggest corporations by revenues, but the big story this year is the steep dive in profit by the companies -- under $99 billion in 2008 vs. $785 billion in 2006. That's a crash of 85 percent, an incredible swing in fortunes for American capital. The magazine admits that there had been a "bubble" in earnings, mainly in finance, although it fails to identify the broad deregulation of that sector as the reason.
The analysts find one reason that profit had been so enormous during the bubble period was that "labor costs, which account for two-thirds of all corporate expenses, barely budged during the glory days." This was in part due to "a pro-business administration" that kept down labor, and as Fortune magazine puts it, "Wages rose modestly." Very modestly -- the Economic Policy Institute reports that real wages grew by 0.0 percent over 2000-2006.
I think the best economists are those that know how to reduce the theories, equations, statistics and history of their profession into simple prose, understandable by anyone. Because economics isn’t science, not even a dismal science. It’s the psychology of your bank account, it’s about the human need to value today by forecasts of tomorrow.
So here’s my explanation of the giant federal “stimulus package,” in a bit of prose that puts what’s happened, and what’s happening, in perspective. See if you can identify who’s who, and what’s what, in my story and link it to our real economic world.
It’s my birthday, and I thought it appropriate to use the occasion for an ode to my dad, the economist. And particularly so given that dad was old-school, flipping terms from a bygone era, terms like macro- and micro-economics. Terms like Keynes, and that great man’s theory of money, theory of interest and theory of employment.
For it was just yesterday that I watched our president-elect stand at the podium and outline to the nation his vision of what it would take to pull us out of this deepening malaise. And what he said I hadn’t heard said since my dad passed on, nearly three decades ago.
What the president-elect said was: Keynesianism. The simple notion that we humans are not tragically tied to an economic fate beyond our control. A notion that had somehow been discredited and forgotten by the emergent ideology of laissez-faire -- a bankrupt right-wing ideology that has now brought our great nation to the knee of a Greater Depression, surfing a seismic wave with the Chicago school at its epicenter, riding a board named Reagonomics, and crashing about a reef known on the charts only as runaway greed meets the ideology of the cancer cell.
I can’t believe it’s happening, but it is. The administration, by which I mean the Bush administration, is failing in a colossal manner yet again.
They invaded Afghanistan, with the largest and most capable military the world has ever known, to track down and capture one man. One man. And they couldn’t pull it off. Here, seven years later, Osama Bin Laden is still at large and living large, tucked away comfortably in a Pakistani safe house, mailing us taunting home videos.
They attacked Iraq, for no understandable reason, telling us the Iraqis would shower us with flowers and, in no time at all, would be paying their own Visa bills.
Five years later, the country is a hopeless quagmire where unvetted private mercenaries have taken the role as our proxy fighters to the tune of nearly a billion dollars of borrowed money a day.