Tag Archives: Economy

The Death of Macho


Good thing someone in this blog‘s coming up with feminist content. =)

The era of male dominance is coming to an end.


For years, the world has been witnessing a quiet but monumental shift of power from men to women. Today, the Great Recession has turned what was an evolutionary shift into a revolutionary one. The consequence will be not only a mortal blow to the macho men’s club called finance capitalism that got the world into the current economic catastrophe; it will be a collective crisis for millions and millions of working men around the globe.

The death throes of macho are easy to find if you know where to look. Consider, to start, the almost unbelievably disproportionate impact that the current crisis is having on men—so much so that the recession is now known to some economists and the more plugged-in corners of the blogosphere as the “he-cession.” More than 80 percent of job losses in the United States since November have fallen on men, according to the U.S. Bureau of Labor Statistics. And the numbers are broadly similar in Europe, adding up to about 7 million more out-of-work men than before the recession just in the United States and Europe as economic sectors traditionally dominated by men (construction and heavy manufacturing) decline further and faster than those traditionally dominated by women (public-sector employment, healthcare, and education). All told, by the end of 2009, the global recession is expected to put as many as 28 million men out of work worldwide.

Things will only get worse for men as the recession adds to the pain globalization was already causing. Between 28 and 42 million more jobs in the United States are at risk for outsourcing, Princeton economist Alan Blinder estimates. Worse still, men are falling even further behind in acquiring the educational credentials necessary for success in the knowledge-based economies that will rule the post-recession world. Soon, there will be three female college graduates for every two males in the United States, and a similarly uneven outlook in the rest of the developed world.

Of course, macho is a state of mind, not just a question of employment status. And as men get hit harder in the he-cession, they’re even less well-equipped to deal with the profound and long-term psychic costs of job loss. According to the American Journal of Public Health, “the financial strain of unemployment” has significantly more consequences on the mental health of men than on that of women. In other words, be prepared for a lot of unhappy guys out there—with all the negative consequences that implies.

As the crisis unfolds, it will increasingly play out in the realm of power politics. Consider the electoral responses to this global catastrophe that are starting to take shape. When Iceland’s economy imploded, the country’s voters did what no country has done before: Not only did they throw out the all-male elite who oversaw the making of the crisis, they named the world’s first openly lesbian leader as their prime minister. It was, said Halla Tomasdottir, the female head of one of Iceland’s few remaining solvent banks, a perfectly reasonable response to the “penis competition” of male-dominated investment banking. “Ninety-nine percent went to the same school, they drive the same cars, they wear the same suits and they have the same attitudes. They got us into this situation—and they had a lot of fun doing it,” Tomasdottir complained to Der Spiegel. Soon after, tiny, debt-ridden Lithuania took a similar course, electing its first woman president: an experienced economist with a black belt in karate named Dalia Grybauskaite. On the day she won, Vilnius’s leading newspaper bannered this headline: “Lithuania has decided: The country is to be saved by a woman.”


The Capitalist Manifesto: Greed Is Good

(To a point)

Fareed Zakaria in Newsweek:

Capitalism means growth, but also instability. The system is dynamic and inherently prone to crashes that cause great damage along the way. For about 90 years, we have been trying to regulate the system to stabilize it while still preserving its energy. We are at the start of another set of these efforts. In undertaking them, it is important to keep in mind what exactly went wrong. What we are experiencing is not a crisis of capitalism. It is a crisis of finance, of democracy, of globalization and ultimately of ethics.

“Capitalism messed up,” the British tycoon Martin Sorrell wrote recently, “or, to be more precise, capitalists did.” Actually, that’s not true. Finance screwed up, or to be more precise, financiers did. In June 2007, when the financial crisis began, Coca-Cola, PepsiCo, IBM, Nike, Wal-Mart and Microsoft were all running their companies with strong balance sheets and sensible business models. Major American corporations were highly profitable, and they were spending prudently, holding on to cash to build a cushion for a downturn. For that reason, many of them have been able to weather the storm remarkably well. Finance and anything finance-related—like real estate—is another story.

Finance has a history of messing up, from the Dutch tulip bubble in 1637 to now. The proximate causes of these busts have been varied, but follow a strikingly similar path. In calm times, political stability, economic growth and technological innovation all encourage an atmosphere of easy money and new forms of credit. Cheap credit causes greed, miscalculation and eventually ruin. President Martin Van Buren described the economic crisis of 1837 in Britain and America thusly: “Two nations, the most commercial in the world, enjoying but recently the highest degree of apparent prosperity and maintaining with each other the closest relations, are suddenly?.?.?.?plunged into a state of embarrassment and distress. In both countries we have witnessed the same [expansion] of paper money and other facilities of credit; the same spirit of speculation?.?.?.?the same overwhelming catastrophe.” Obama could put that on his teleprompter today.

Many of the regulatory reforms that people in government are talking about now seem sensible and smart. Banks that are too large to fail should also be too large be leveraged at 30 to 1. The incentives for executives within banks are skewed toward reckless risk-taking with other people’s money. (“Heads they win, tails they break even,” is how Barney Frank describes the current setup.) Derivatives need to be better controlled. To call banks casinos, as is often done, is actually unfair to casinos, which are required to hold certain levels of capital because they must be able to cash in a customer’s chips. Banks have not been required to do that for their key derivatives contract, credit default swaps.

Yet at the same time, we should proceed cautiously on massive new regulations. Many rules put in place in the 1930s still look smart; the problem is that over the past 15 years they were dismantled, or conscious decisions were made not to update them. Keep in mind that the one advanced industrial country where the banking system has weathered the storm superbly is Canada, which just kept the old rules in place, requiring banks to hold higher amounts of capital to offset their liabilities and to maintain lower levels of leverage. A few simple safeguards, and the whole system survived a massive storm.


The Next Tax Revolt

Yglesias on the art of learning how to love taxes:

Obama did not change the framework so much as find a way to survive within it. A platform of no tax increases for the bottom 95 percent can win elections, but it reinforces rather than debunks the right’s fundamental view of the tax question — that public services aren’t worth paying for — and merely suggests that the correct answer is to get someone else to pay for them. This is, to be sure, better than the alternative, which is to provide no public services at all. And amid a cataclysmic recession, there are sound macroeconomic reasons to eschew any kind of tax increase until recovery is underway. Still, it’s hard to see how a long-term progressive agenda can be financed with the revenues raised through this method. A March report by the Congressional Budget Office showed that the administration’s proposed budget would lead to unsustainably large deficits in which interest payments would steadily grow as a slice of the budget pie. This set off a brief political firestorm, but attention waned once it became clear that neither congressional Republicans nor Democratic deficit hawks had any serious alternative to offer.

For the moment, that’s all for the best. The administration argued, correctly, that its proposed increases in spending are vital to transforming the country’s health, energy, and education sectors. The mere fact that the 2010 budget document implies unduly large deficits in 2014 or 2017 is not a problem in 2009 when the bleak macroeconomic outlook calls for large short-term deficits. The moderates were not off base in their concerns about long-term deficits. But, having drawn attention to a real problem, they were unwilling to face the only realistic solution: higher taxes.

The flaw in the budget is that the taxes it proposes are too low.


Crisis and Resistance in the Neoliberal City


This foreclosure crisis, this financial crisis, has to be thought of as a crisis of the city, a crisis of urbanization – and if it’s a crisis of the city and of urbanization, then the solution has to be a
reconfiguration of the city and a redirection of what urbanization is about. The pattern of this crisis is not anything new; and one of the things that happens in the U.S., and on the left in general, is that we seem sometimes to suffer from amnesia as to what has happened in the past. I would like to recall that the last biggest crisis period of capitalism, from around 1973 to 1982, was a deep crisis of urbanization. It began with the collapse of global property markets in the spring of 1973, leading to the bankruptcy of several financial institutions, followed of course by the Arab-Israeli war and the oil price hike (which everybody remembers more than they remember the property market crash). This was followed by a crisis of municipal finance and the disciplining of almost all cities, not only in the U.S., but around the world, to a new regime of financial terror, what I’d also call “neoliberal politics.” Understanding what this regime was about is crucial because it was part of the solution to the crisis of the 1970s, a solution which underpins the nature of the crisis we are currently in. This is a terribly important point to make, because how we come out of this crisis is almost certainly going to define the nature of the next crisis down the road – unless we decide to say, “To hell with capitalist crises! To hell with capitalism!”


* Video

World Economy: Bottom of Output Reached

In the first quarter of 2009 global production continued to shrink at a breathtaking pace, but indicators increasingly point to stabilization of output in the course of the summer semester. However, we expect the coming recovery to be modest by historical standards. Global GDP is forecast to rise by 2.3 percent in 2010, again significantly below its trend growth rate. While this represents a slight upward revision from our March projections, the outlook for economic growth in 2009 has significantly deteriorated further. We now expect world output to drop by 1.5 percent (March forecast: –0.8 percent).


The Real Perils of Human Population Growth

About forty years ago, the world population was only 3.5 billion, or about half of the present population of 6.7 billion people. Most of us seem to ignore or be unaware of the magnitude of this rapid expansion and the vast changes that it is causing throughout the world. Indeed, the daily and even the annual impacts of this growth go unnoticed. Yet the impacts of the growing world population on land, water, energy, and biota resources are real and indeed overwhelming.

What resources are required to secure a quality life for future generations worldwide? Will there be sufficient cropland, water, energy, and biological resources to provide adequate food and other essential human needs? Balanced against the future availability of these basic resources are the escalating needs of an ever-growing population.

Clear scientific evidence suggests worldwide problems of food availability already have emerged. According to the World Health Organization, nearly 60 percent of the world population now is malnourished—the largest number and proportion of malnourished people ever reported in history. Further, many serious diseases, like malaria, HIV/AIDS, and tuberculosis are increasing, not only because of worldwide malnutrition but also because the increasing density and movement of human populations facilitate the spread of diseases.


Econs and Humans

Economics has traditionally ignored psychology. In Nudge, Richard Thaler and Cass Sunstein take a step toward greater realism about it. […] The authors start off by differentiating “Econs” from “Humans.” The former are the efficient calculators imagined in economic theory, able to weigh multiple options, forecast all the consequences of each, and choose rationally. The latter are ordinary people, who, like the analysts on Wall Street, fall well short of homo economicus. Humans operate by rules of thumb that often lead them astray. They are too prone to generalize, biased in favor of the status quo, more concerned to avoid loss than make gains, among other shortcomings. So they often fail to manage their personal affairs to the best advantage.

Thaler and Sunstein think that ordinary folk should be “nudged” to decide more rationally. A “nudge,” as they conceive it, means some change in the “choice architecture” surrounding personal decisions that will cause Humans to choose differently and better, even though an Econ would be unswayed. Often that means changing the default option—the choice made for people if they do not choose. For example, many employees save too little for their retirement because they fail to sign up for 401(k) plans offered by their employers. The authors would change the default from opt-out to opt-in-employees would be enrolled in pension plans unless they said otherwise. Workers would also be encouraged to commit now to pay higher pension contributions in future, if not today. Both steps would raise savings substantially. Another nudge would be to establish better defaults for allocating pension contributions among different investments. Also, many people say they are willing to donate their organs for transplants when they die, yet fail to sign up. Again, the authors would change the default from opt-out to opt-in-people would be presumed willing to donate unless they declined.


Cass Sunstein’s new book Nudge (At Democracy NOW)

Το κόστος της ανάπτυξης

Αναμφίβολα λοιπόν θα πρέπει να σπεύσουμε σαν ανθρωπότητα, σαν πλανήτης, σε μια «πράσινη» κατεύθυνση. Αλλά όχι στην κατεύθυνση των πράσινων προσχημάτων, όχι στην φενάκη του «μια μικρή δυσκολία είναι, θα την ξεπεράσουμε», και της «εταιρικής ευθύνης». Αυτό που χρειαζόμαστε είναι μια ανακατεύθυνση της κοινωνίας προς ένα άλλο καταναλωτικό πρότυπο, προς μια οικονομία που θα αλλάξει δραστικά προτεραιότητες και θα τις επανασταθμίσει με βάση τις ανθρώπινες ανάγκες. Μια κοινωνία ισόνομη, ίση και δημοκρατική. Αυτό το ευκταίο και σωτήριο πρότυπο θα επαναφέρει την δημόσια σφαίρα στο επίκεντρο της οικονομικής δραστηριότητας, με συλλογικότερους ίσως και δημοκρατικότερους όρους από ότι στο παρελθόν, θα ξανασκεφτεί τους κοινούς και προσωπικούς μας στόχους και θα θέσει σε κίνηση μια από τις δραματικότητες στροφές της ανθρωπότητας στην ιστορία της. Με άλλα λόγια το δίλημμα είναι «σοσιαλισμός ή επιβίωση», (αλλά κατά Κορνήλιο και Ροζα και όχι Γεώργιο φυσικά).

(Hat tip: (mischievous) @autre =)

Reagan Did It

Paul Krugman remembers:

“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. … All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.

He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.