Wednesday, January 31, 2018

SOTU

So I was disappointed in Trump's speech in two ways. First, it was much too long. He spent too much time applauding "heroes", most of whom didn't seem all that heroic to me. Otto Warmbier's parents, for example, deserve our sympathy I suppose, but it's a stretch to think they are "heroes". I found that whole thing corny and not worth the time, but then I acknowledge I'm not a typical listener.

Second, we were all led to believe that it would be a "bipartisan" speech. And my model of Trump (a secret Democrat) predicted he would have done that. But he didn't. While there were a few bones thrown to the Democrats, they were very few, and the speech was mostly aimed toward the Republican side of the house. Indeed, he looked almost exclusively at the Republicans, casting only occasional glances toward the Democrats. It's as if they weren't even there.

Why?

One possibility is he intended it to be a bipartisan speech, but then missed the target. That's possible, but somehow I doubt it. This is a guy who understands media better than anybody else on the political planet--I can't imagine he'd get this wrong by such a wide margin.

The other possibility is that he thinks he can beat the Democrats, and rather than compromise he went in for the kill. If you judge by the faces on the Dems, that certainly seemed to be true--they all looked desperately unhappy.

So take DACA. The Dems want to grant citizenship to 600,000 Dreamers. Trump raised them by a factor of three--his proposal will naturalize 1.8 million Dreamers. I certainly support that! I can't imagine that the Dems will seriously be able to oppose it.

But of course it comes with a catch, or actually three catches: build a wall; end chain migration; end the visa lottery.

So here's the asymmetry: for Republicans those three catches are vote movers. Stronger border security is a core issue for the Republican base. And most people--even Republicans--are generally sympathetic to Dreamers. Trump is on the popular side of the issue in all ways, and will grab independent and even Democratic voters.

The Democratic base, on the other hand, cares passionately about naturalizing Dreamers. But Trump has conceded that issue--by a factor of three! The other stuff is down in the weeds--important to politicos, but not the kind of thing that's going to drive Dems to the polls.  Outside of a college campus it really is hard to argue against more border security and a rationalized legal immigration system.

So in 2018 the Dems are running on Dreamers, for which Trump has outbid them, and on opposing some small-scale,  commonsense reforms in immigration. They can't win.

Then there was the shtick about standing for the flag. Super-wealthy, entitled NFL players can't even pay respects to military veterans (according to Trump). It tars the core Democratic base as being unpatriotic and makes them unappealing to a larger number of voters. This is another vote loser for the Dems.

And more. Do the Dems really think they can win elections by going soft of N. Korea or Iran? Are they really going to oppose new infrastructure because Trump wants to shorten the permitting process to under two years? Are they going to campaign to put millions of people out of work for the sake of stupid EPA regulations?

Even the Jerusalem thing helps Trump, not so much with voters, but by putting daylight between the Dems and their important Jewish donors.

It is pretty clear that Trump believes he can win the 2018 midterms. He doesn't think he needs to compromise with the Democrats at all.

So I don't know if that will work out as planned. We'll see what happens in about nine months.

Further Reading:


Friday, January 26, 2018

Book Review: Gorbachev

"Gorbachev is hard to understand." So said the man himself, characteristically using the third person, as quoted in William Taubman's excellent biography, published in 2017. And true enough: understanding Gorbachev means knowing the man, his time, his country and his historical circumstances. Was the collapse of the Soviet Union historically inevitable? Or was it the fault (or credit) of Gorbachev? Or did Gorbachev simply hasten what would have happened anyway, albeit perhaps not for a couple of decades?

However hard it is to understand Gorbachev, it is very easy to like him. Born in 1931 in Russia's Stavropol region, he grew up in a peasant household during times of famine, purges and war, all of which touched his family. For all of that he still managed to have a happy childhood, close to both his parents (esp. his father) and grandparents. Ambitious at a young age, along with his father he served as a combine driver harvesting 8,888 centners of grain, earning him the Order of the Red Labor Banner in 1948, one of the USSR's highest medals.

So young Mikhail Sergeyevich grew into a man: garrulous, confident, friendly, loyal, and extraordinarily well-read, especially considering his semi-literate family.

That, along with native intelligence and a prodigious work ethic, earned him a place at Moscow State University (MGU)--the Harvard of Russia, both then and now. There he studied law (in a country that didn't really have any), and met the love of his life, Raisa Maximovna Titorenko. She, also brilliant, studied philosophy. They were married from 1952 until her death in 1999.

Following university in 1955 Gorbachev was sent back to Stavropol, a posting neither he nor his wife initially wanted. He began his career as a minor functionary with Komsomol, cashing in not only on his MGU credential, but also the Red Labor Banner. In 1969 he was chosen as general secretary of the Stavropol region, a job he held until 1978.

Such a rise required much ass-kissing, and yet somehow Gorbachev never lost his original idealism. He worked hard to make Stavropol a better place, and it began with agriculture. That mainstay of the local economy suffered from notoriously low productivity. Supposedly new machinery arrived broken, other inputs arrived late or not at all, and what was harvested couldn't be properly stored or transported. Most seriously, the peasants were not motivated to work on the kolkhaz (collective farm), from which they derived little benefit.

Gorbachev understood that the extreme centralization of all decisions in Moscow was the leading problem. He railed against that, trying to earn as much autonomy for his people as he could. And in whatever small measure he could affect the outcome he tried, though mostly to no avail. His efforts did succeed in raising his profile in Moscow.

At least as important to his future was that Yuri Andropov served as his mentor, not least because he shared his disciple's idealism. Andropov, also from Stavropol, later served as Brezhnev's successor as USSR General Secretary. In 1978 Gorbachev was appointed Central Committee secretary in charge of agriculture. Such an important portfolio meant he could return to Moscow and join the Politburo.

An important portfolio--yes--but also known as a graveyard for political careers. For improving the abysmal state of Soviet agriculture was nigh an impossible task, failure for which redounded to the secretary. Gorbachev, despite dramatic effort and frenetic activity, failed as much as any of his predecessors.

Brezhnev, long since senile, finally died in 1982. He was succeeded by an already ill Andropov, who in turn left the job to the similarly decrepit Konstantin Chernenko, who passed in March, 1985. His logical successor was Andrei Gromyko, already 74 years old, a dour apparatchik and longtime foreign minister.

In a typical display of tactical genius, Gorbachev bought off Gromyko by promoting him to the largely honorary post of Chairman of the Presidium of the Supreme Soviet. And so the younger man became General Secretary by unanimous vote of both the Politburo and the Central Committee.

For the first three years or so of his reign, Gorbachev had the full support of the Politburo. Everybody knew that the Soviet economy was collapsing, that the war in Afghanistan had to end, and that the Cold War with the US couldn't continue. The country was bankrupt. Even without Gorbachev the status quo was no longer viable.

But Gorbachev was different. Unlike his predecessors, he loved the public limelight, and thoroughly enjoyed street walkabouts among everyday people. And he could talk--too much actually. Unlike Brezhnev, who in rare public appearances read from a script, stumbling and mispronouncing words, Gorbachev spoke expertly and extemporaneously. That led to a joke:
Gorbachev is much worse than Brezhnev. He doesn't even know how to read.
Soon came the two words that would define the rest of Gorbachev's life: glasnost and perestroika, meaning, respectively, openness and restructuring.

Glasnost was relatively easy, albeit painful. The immediate purpose was to make economic statistics transparent and public--you can't fix a problem you can't see. But what happened was the wholesale revelation of Stalin's crimes. This was very painful, especially to the older generation who venerated the old man. And especially to the elderly members of the Politburo who took the whole thing as an assault on Communism. It was at this point the first cracks in Politburo began to appear. Yegor Ligachev (1920 - ), initially a staunch Gorbachev ally, gradually turned against him.

Perestroika, obviously necessary, was much harder to accomplish. Gorbachev got off on the wrong foot trying to improve productivity by taxing vodka--that went over like a lead balloon. While he understood that decentralization was crucial, actually doing that meant firing thousands of bureaucrats, all of whom fought desperately for their jobs.

In the end perestroika was no more successful than Gorbachev's initial efforts to reform agriculture. The Soviet economy went from bad to worse, and Gorbachev's popularity went down with it.

Only in foreign affairs was our man reasonably successful. He pulled out of Afghanistan. He had very good relations with Margaret Thatcher, Helmut Kohl, and especially Francois Mitterand. He loved the accolades he got from Western audiences, which he no longer received at home.

By the end perestroika had changed its meaning. It was obviously no longer possible to restructure the economy within the Communist system--perestroika had gradually morphed into counter-revolution (my term). I think Gorbachev should have accepted the 500-day program, which would have intelligently privatized the economy (unlike what Yeltsin did a couple of years later).

From 1985 to 1988 Gorbachev was mostly in control of the situation. Beginning in 1989 the wheels started to come off the bus, and by 1990 the master tactician could no longer keep up with events. In 1991 came the reactionary (and completely incompetent) coup, after which Gorbachev essentially gave up, ceding the limelight to Boris Yeltsin.

Gorbachev is an honorable man. I thought so then, and I think more so now after reading Taubman's book. He refused to engage in violence. He was not personally corrupt. He refused to fire people--partly for Machiavellian reasons (keep your friends close, and your enemies closer), but also because he felt sorry for people. At the end this strategy no longer worked.

He may not have been responsible for the demise of the USSR--that probably would have happened anyway, if not in 1991 then only a few years later. But that it happened peacefully without brutal ethnic conflict or civil war--that I think is largely due to Gorbachev's honor and moral sense.

And for that we can all be very grateful. He is a good and important man.

Further Reading:

Tuesday, January 16, 2018

Bitcoin & Big Box Stores

The current issue of The Militant contains two articles of economic interest. One, by Terry Evans, is about bitcoin, while the other, by Brian Williams, covers the travails of big box retail. The paper is alone on my Beat in paying any attention to the economy at all. Further, they're the first to make any comment about bitcoin. While I'll take a smidge of credit given that my recent posts about bitcoin may have been a prompt, they still deserve praise.

Both articles suffer from the same fundamental flaw: they assume that capitalism is in a crisis.

Obviously that's completely wrong. The global economy is running strong, with no recession on the immediate horizon.

Mr. Evans writes,
For decades, as capitalist profit rates have tended to decline, the bosses have been plowing their cash into speculation — or hoarding — rather than investing in capacity-expanding plant equipment and employment.
There's a contradiction here: where does the cash hoard come from if profits are declining? Putting more cash into "speculation" requires cash to begin with, which can only come from profits and/or wages.

As I've said many times, "profit rates" is an ambiguous concept, and in no meaningful way can they "tend to decline." They're certainly not declining now! Still, Mr. Evans is correct after a fashion--there are relatively few opportunities for investment today and therefore there is a savings glut (Larry Summer's term). This leads to low interest rates and a corresponding rise in asset prices, including bitcoin.

But this has nothing to do with a crisis in capitalism. There are at least two other explanations.

1) Demographics. The American population is barely growing at all, and arguably our labor force is shrinking. Fewer workers require less capital, and thus because of continued high profits there is more spare cash left over.

2) Technology. More industries are being computerized. Moving parts (and labor) are being replaced by computer chips--e.g., carburetors supplanted by electronic fuel injection. Computer chips are cheap, which means much less capital is required.

To buttress his case Mr. Evans cites that financial whiz kid, Jack Barnes, specifically a piece written in 2002. Mr. Barnes
explains speculative bubbles are “a manifestation of what Marx called commodity fetishism, the illusion that commodities and capital somehow have a social meaning in their own right, independent of the social labor that went into creating them, a life of their own.”
I think that's gibberish. It sounds like Mr. Barnes advocates a return to a barter economy.

The value of any object is a collective hallucination. A dollar is worth a donut only if a donut is worth a dollar. Both Dunkin' and I imagine that to be true, and hence a market is made in donuts. If they don't want to sell me a donut at that price, or if I don't want to buy one, then donuts will no longer "have a social meaning in their own right," whatever that means.

A Loonie coin is a token, sustained by collective hallucination. However, only Canadians share that imagery. Bring Loonies south of the border and you'll find they won't buy you a donut or anything else. We don't hallucinate about Loonies down here, and per Mr. Barnes we have a better grasp on reality. Does that mean Canadians don't "have a social meaning in their own right?"

Bitcoin is also a token. It has value as long as people believe it has value. There are reasons for people to hallucinate that, which I detailed in my previous post. I do not believe bitcoin's value will go to zero.

By the way, today bitcoin touched $10,000, or nearly a 50% drop from its all-time high. If bitcoin was in a bubble, then it certainly isn't in one now.

Here is Mr. Williams' lede:
While the big-business media has boasted that retail sales were up during the 2017 holiday season — 3.8 percent higher than the year before — the crisis of the bosses in the retail industry continues to unfold as growing numbers of U.S. retail and apparel companies face increasing debt, bankruptcy and competition.
On the one hand he acknowledges consumers are doing well--we got 3.8% more stuff than we got last year. Hurray!

Yet the retail industry is supposedly in crisis, suffocating under debt, bankruptcy and competition.

Later in the article he cites leveraged buyouts as a major culprit, by which speculators took companies private by foisting on them enormous debts. These capitalists, he tells us, made short-term gains while somehow (mysteriously) escaping the long-term losses.

There are two ways of financing any business: debt and/or equity. How capital is structured makes a big difference to the investor, but on net it makes little difference to the firm. The Coase Theorem says that financing via debt or equity or some combination won't matter at all except insofar as transaction costs are different.

That is, an insolvent firm will go bankrupt no matter how it's financed. Either the company will default on its bonds, or the share price will head towards zero. The net outcome is precisely the same. Conversely, a successful company will have a growing share price, or be able to float new bonds at very favorable rates.

So the problems in the retail industry have nothing to do with leveraged buyouts--they'd be just as much in trouble if they relied on selling shares. Toys "R" Us went bankrupt only because technology rendered the company's business model obsolete. A big-box toy store can't compete against Walmart on price, nor against Amazon on selection and convenience, nor with the corner Ma & Pa store on sales of high-end, bespoke items for a niche market.

When was the last time Mr. Williams has ever been to a Toys "R" Us store? I'll hazard never. Even I, when my children were still children, never went to Toys "R" Us. So why should a whole bunch of employees sit around all day waiting for no customers to walk through the door? It is surely much better--for them and for society alike--if their labor is invested in something useful. Or, in Mr. Barnes' precious phrase, doing something that has "a social meaning in [its] own right."

This is the problem with socialists: they're Luddites. No progress is allowed. However novel and revolutionary Sears, Roebuck or Toys "R" Us may have been in the past, we now need to keep them on no matter what--frozen in amber.

Let the companies go bankrupt. So what of the bondholders lose their fortune. Surely Mr. Williams doesn't feel sorry for them--and neither do I. In today's economy (4.1% unemployment) the former employees of those companies will be instantly reemployed more productively. The workers will make out just fine.

The big winner will be consumers--people with children who like to buy quality toys at cheap prices and maximum convenience.

Further Reading:

Thursday, January 11, 2018

"The Militant" Gets One Right

The Militant has long come to the defense of Cliven Bundy and colleagues, who are cattle ranchers in Oregon and Nevada. They were prosecuted by the Feds for grazing cattle on federal land without the necessary permission. I have not followed the case at all, and figured they were a bunch of crackpots.

But in the past week the judge ruled a mistrial, and then in a further move dismissed all charges against the clan. They've been set free after 700 days in jail.

Good for them. The Libertarian in me says that the government owns way too much land out west, especially in Nevada. It should be sold off wholesale.

I have no idea what relevance the Bundy case has for the "revolution." But whatever--The Militant picked a winning issue, stood by it, and has been vindicated. Kudos.

Further Reading:

Thursday, January 4, 2018

If Everybody is a Racist, Then Nobody is a Racist

A two-part series in Solidarity by Malik Miah is worth the read. The first article is entitled White Supremacy/Identity Politics, while the second is Black Nationalism, Black Solidarity. These describe the two sides of the race war that Mr. Miah tentatively predicts for our nation's future.

That Mr. Miah, a Black man, thinks race is the most important issue of our time is perhaps not surprising. I think he has a better understanding of Black folks than he does of us whites, so let me start there.

Surprisingly, I agree with him on many points.

He writes:
Blacks would be happy to drop the hyphenated “African-American” and redefine the term “American” as meaning all of its peoples. Most whites, however, don’t support that change if it means seriously coming to grips with the legacy of slavery, genocide and persistent racism.
I certainly agree with that first sentence--if any group is American it's Black people. They've been on these shores far longer than any of my ancestors, or those who came later through Ellis Island. Blacks' impact on our national culture is disproportionately large. They deserve to be called Americans.

By the way, that's what Mr. Trump wants to call them.

But I don't know what Mr. Miah means by the second sentence. How can he put such conditions on the use of a label? What's he gonna do: interview us to discover if we're sufficiently "woke" to call Black people Americans?

Mr. Miah quotes a New Yorker article, saying that a FBI report
...coins the category “black-identity extremist,” which is poorly defined but features the three-word rhythm of other usefully ambiguous terms, such as “radical Islamic terrorist.” The authors argue that people sympathetic to the Sovereign Citizens movement and to the Moorish Science Temple of America, both of which reject the authority of the federal government, warrant vigilance, even though violence conducted by any such sympathizers “has been rare over the past twenty years.” To ground their conclusions in history, the authors point to radical organizations of the nineteen-seventies, such as the Black Liberation Army, which has been defunct for longer than Johnson had been alive, and for which they offer scant connection to the B.I.E. cause.
Mr. Miah maintains that such radical Black extremism is hopelessly rare and is not a political threat. I think he is absolutely correct, and beyond some ill-chosen rhetoric from groups like Black Lives Matter, there's no evidence for "black-identity extremism." (It is a criminal threat to police officers--it only takes one crackpot to start shooting at people. In that sense the FBI's interest might be justified.)

Indeed, I'll go further and suggest that racial tensions are diminishing since Trump's election. It's not that we like each other more; it's just that we're better able to live together. Mr. Miah cherry-picks some examples to illustrate the contrary (e.g., a white Georgia woman stopped for a traffic violation was told by a cop that her fear was unfounded because they only shoot Blacks). So I'll give a counter-anecdote of my own.

I live in a neighborhood that is about 50% Black (many of whom are Jamaican immigrants). I didn't know that before I moved here. Yes, I drove around the neighborhood and saw well-tended yards, newish SUVs in the driveways, no abandoned homes, and no grafitti. Looked like a middle class neighborhood to me, and so I moved in. Indeed, it IS a middle class, American neighborhood. If we're on the verge of a race war, nobody has told my neighbors about that.

I think Mr. Miah exaggerates "voter suppression" efforts by Republicans. He attributes it to racial animus, though I think it's more likely partisan. But he is understandably mistrustful. So I suggest that Trump and Republicans abandon such efforts save for egregious fraud. It makes very little difference in electoral outcomes, and dropping it will remove a needless thorn from racial politics.

Further, I'll second a suggestion from Scott Adams and recommend that voting rights be restored to felons--even while they're still in prison. Mr. Adams makes a convincing case that election results won't change by much, and it's a small act of generosity toward both prisoners and (by perception at least) Black people. I hope Mr. Miah will approve of this idea.

The last half of Mr. Miah's essay on Black people is about Black nationhood, or lack thereof. He quotes from Trotsky, of course, who sounds like he knew very little about the subject. To me it seems incontrovertible that Blacks are an ethnic group--certainly no longer African, but yet distinct from other Americans. They make up about 12% of the population, and by themselves will never have national political power. They currently are a big part of the Democrat's coalition.

Mr. Miah seems to think that Blacks are going to lead a demographic coalition of non-whites against whites. I think he's wrong there. There are too many differences between non-whites for them to cohere into a single political movement. And indeed, there is no coherent "white" coalition, either.

If Mr. Miah's description of Black people makes some sense, his view of white folks is completely bonkers, as this quote indicates.
If you are not completely opposed to white supremacy, you are quietly supporting it. If you continue to draw equivalencies between white supremacists and the people who oppose them — as Trump did once again last week — you have crossed the racial Rubicon and moved beyond quiet support to vocal support. You have made an allegiance and dug a trench in the war of racial hostilities.
Either Trump is himself a white supremacist or he is a fan and defender of white supremacists, and I quite honestly am unable to separate the two designations.
The ubiquity of "white supremacy" is new to our discourse--before people were just called "racist." But that word has lost its sting. Everybody--George Bush, John McCain, Mitt Romney, etc.--was labeled "racist," and nobody takes it seriously anymore. It no longer distinguishes between the KKK and Paul Ryan, and so the term is rendered useless.

Thus the drive to replace it with the supposedly more horrific "white supremacist." But Mr. Miah is now including everybody under that umbrella, too. Not just Trump (who by no reasonable definition is anything close to being a white supremacist) but also anybody who voted for him (48% of the electorate, and a majority of all white people). Mr. Miah's explanation for this is that "white supremacy" has gone undercover. While its substance has supposedly remained the same, it disguises itself today much better than any KKK hood.

Thus "white supremacy" is reduced to being an epithet and it will lose its punch very quickly. Indeed, it probably already has.

So here is the difference between Trump and Obama. For Obama, race was an important issue, just as it is for Mr. Miah. Trump, on the other hand, is completely indifferent--his remarks following Charlottesville indicate as much. (See my comments here.) This comes as a shock to people like Mr. Miah who think about race every single day--how can somebody not care?

Not only does Trump not care, but neither do most of his supporters. Take, for example, Chicago, where I lived when I was Mr. Miah's comrade, and where my son lives today. The North side of town is the global city, headquarters of Fortune 500 companies. The South side is the murder capital of America. The two parts are completely distinct--they have almost no connection to each other. For just as Mr. Miah doesn't wake up in the morning worrying about children in Yemen, North side Chicagoans don't spend any part of their day thinking about West Englewood.

That's not good. Mr. Miah really should care more about Yemen's youngsters. And global-city Chicagoans should worry about their South side neighbors. But that's not human nature. We're all wrapped up in our own lives.

Further Reading: