Commentary on Galbraith

No honest person who has even a layman's understanding of macroeconomics can doubt that James K. Galbraith's testimony is in its entirety accurate and perspicacious. He is not just correct, he is obviously correct. There are only three reasons to deny the truth of his statement — ignorance, delusion or mendacity — and only one honest reason to oppose his position: fundamental moral opposition to liberal capitalism.

As a communist, I myself am in a sense morally opposed to liberal capitalism, because I don't believe it is good enough; I do, however, believe that liberal capitalism is immeasurably more moral than laissez faire capitalism. My fundamental objection to liberal capitalism is precisely that it is defeatable by laissez faire capitalism.

Dagood has an interesting post on indirect and dishonest arguments for keeping "under God" in the Pledge of Allegiance. Just like the pledge, the direct argument for immediate deficit reduction and fiscal austerity is simply impossible to make. A direct argument would entail the claim that it is inherently good for the vast majority of people around the world — especially those presently enjoying a standard of living above bare subsistence — to become poorer, for a substantial number of people to fall to bare subsistence, and for many to literally starve and die. Arguments for fiscal austerity must therefore be indirect: without fiscal austerity the economy will collapse further; we cannot regain what we had; we can act now only to prevent further impoverishment.

And, like the arguments against changing (yet again) the Pledge, even the indirect arguments are fundamentally dishonest. I do not doubt that many, perhaps even most, advocates of fiscal austerity are sincere (and delusional). But neither do I doubt that some important, influential advocates know they are lying through their teeth — and are doing so to further their own interests.

But what interests are they furthering? One critical passage from Galbraith's testimony:

[W]hat does the present level of long-term interest rates tell us? As I write, thirty year Treasury bonds are yielding just over four percent -- or just a little more than half their yield a decade back. On the argument just given, this must be an extraordinary success of virtuous policy. It seems that Wall Street has made a strong vote of confidence in the fiscal probity of our current policies. This vote is unqualified, backed by money, contingent on nothing. It therefore represents a categorical rejection, by Wall Street itself, of the CBO's doomsday scenarios and all other deficit-scare stories.

It is crystal clear that the capitalist ruling class, when they are voting with real money, are voting for increased government borrowing. On the other hand, those selfsame parties are exerting political pressure (which requires only chump change) for less government borrowing.

Delusion cannot explain this apparent contradiction: if they were delusional, they would not be eagerly lending the government money at rock-bottom interest rates.

Another critical point from Galbraith's testimony: The Deficit Commission's secrecy breeds the suspicion that its purpose "is to defer public discussion of cuts in Social Security and Medicare until after the 2010 elections." Galbraith raises this suspicion to a near certainty by remarking that "the Commission has taken up the questions of the alleged "insolvency" of the Social Security system and of Medicare. If true, this is far outside any mandate of the Commission."

Since its inception, a faction of the capitalist ruling class has shown a profound and explicit antipathy and exercised vigorous opposition to Social Security and Medicare. Their efforts, both directly and indirectly (to take state power) have had as one of their explicit goals to eliminate Social Security.

I'm reluctant to invoke actual evil as a motivation. I do not believe that the Randian faction of the capitalist ruling class would actually take pleasure and satisfaction from the impoverishment and starvation of the elderly and disabled. (They do, however, openly show what a humanist would call depraved indifference.)

We cannot explain this antipathy on the basis of immediate material interests. Social Security does not even affect the capitalist ruling class or the upper levels of the professional-managerial middle class: Social Security taxes come from the working class and the lower and intermediate ranks of the middle class. Bill Gates pays no more Social Security tax than a first-year associate at a big law firm. Social Security taxes do not even affect the market for labor power; you work or starve until you're 65. (It's implausible to believe the capitalist ruling class wishes to use saving for one's retirement as an actual incentive for workers.)

We cannot even explain this antipathy to Social Security — nor the push for fiscal austerity — on the basis of long-term material interests. The capitalist ruling class as a whole would gain nothing material at any level from either the elimination of Social Security nor the long period of high unemployment that would result from fiscal austerity.

When you see a large group of people (too many to invoke literal insanity as an explanation) apparently acting contrary to their own interest, you have misunderstood their interest.

The immediate interest of the capitalist ruling class is intra-class competition. Within-class selection pressures ruthlessly and decisively eliminate or marginalize members of the capitalist class who lack the highest level of competitive spirit and the desire to win at any cost.

How would you — an ordinary working- or middle-class reader — feel if the government reserved and exercised the power to confiscate — for good use — your alarm clock at any time? It's a small, inexpensive thing, easily replaced by a minimally inconvenient trip to the store. You certainly pay many orders of magnitude more in time and money in ordinary taxes. If it's really for a good use, you're happy to pay for another alarm clock, but that particular alarm clock is by damn yours. And if the government can barge in and take your alarm clock today, why not take your computer tomorrow, and your car the next day. Personal property really is important, emotionally and materially, and there's a natural tendency to preserve the principle in even small things. Indeed, a principle that we don't protect in small things is no principle at all, which is why we have trials in court for traffic tickets.

When your entire being is focused on competition — and no one remains long in the capitalist ruling class whose entire being is not focused on competition — there is a natural tendency to regard what you win as yours. The New Orleans Saints would, I think, object to sharing the Vince Lombardi trophy with the St. Louis Rams, even though in a very real sense the Saints could not have won the trophy without the Rams... someone has to come in last.

The capitalist ruling class competes over ownership of the surplus labor of the working class. They regard this surplus labor as their property. To be told — and coerced — that even a little bit of this surplus labor — transferred from workers to the elderly and disabled — is not theirs is, in their view, to fundamentally undermine and erode not just their material interest but their fundamental raison d'etre.

One common misunderstanding is that dialectical (historical) materialism entails that members of a class always act to further their class's economic interests. If, for example, the capitalist ruling class opposes Social Security, or politically opposes fiscal stimulus in a zero lower-bound limited recession resulting in higher unemployment, it must be because they believe these actions to be in their material interest. The truth, however, seems more subtle than that.

Moral and ethical beliefs are in a dialectical relationship with economic relations. (And both are in a dialectical relationship with the physical means of production.) Entities in a dialectical relationship affect each other. Some economic relations materially change (by selection pressures) a distribution of ethical beliefs in each class, and these ethical beliefs produce (by the actions of those who hold them) materially change the economic relations. There is no objective ideal "optimum" towards which people strive: the "optimal" economic relations are in a sense defined by the ethical beliefs of the actors, and the ethical beliefs of the actors are in a sense defined by the economic relations.

What makes life (and economics) interesting is that this feedback system is not always convergent: particular economic relations can produce particular ethical beliefs that radically change the economic relations, which radically change the ethical beliefs. Sometimes this process is stable and convergent, sometimes stably chaotic and sometimes leads to catastrophic failure. And, of course, every now and again physical reality throws a monkey wrench into the works (or economic activity drastically changes reality), changing everything.