Let Them Eat Little Bits of Green Paper

From The Militant

People live well when they have enough money to buy the consumer goods they want and need.

People are poor when they either don't have enough money, or when consumer goods are not available at an affordable price. In Keynesian parlance, the former case is known as a demand side shock, while the latter is a supply side shock. (Without getting into any argument about the relevance of Keynesian economics, the nomenclature is helpful.)

The Great Recession of 2008 was a classic demand side shock. Housing prices collapsed, the stock market went down, and trillions of dollars of wealth were destroyed. The result was a sharp drop in the money supply, greatly reduced demand, after which followed bankruptcies, factory closures and unemployment. Everything spiraled downhill from there.

The Keynesian solution to a demand-side shock is for government to pump money into the economy by deficit spending, thereby putting people back to work again and so increasing natural demand until the economy recovers. This is called stimulus, and the federal government under Bush and Obama did approximately that. The economy has since recovered. At least that's the simple story--one can argue about how true it is.

The problem today is precisely the opposite--we have a supply-side shock. To illustrate, in January people used to eat in restaurants. By April, because of the virus, restaurants were deemed unable to serve food safely, and therefore nobody ate in restaurants. All of a sudden the supply of restaurant meals collapsed to zero--despite the fact that consumers had plenty of money to spend in restaurants.

A similar story can be told for airlines, hotels, and Uber rides. The problem was never lack of money, but rather the lack of safe supply of said services. Workers in those industries were laid off, unemployment ensued, rent and mortgages went unpaid, and it spiraled downhill from there.

Demand-side and supply-side shocks both end up in roughly the same place, but they get there by two different routes. The solutions have to be different. As mentioned, for the demand-side shock the government needs to provide stimulus. But for a supply-side shock that is precisely the wrong medicine.

The best solution for a supply-side shock is for the Fed to wave a magic wand and get all the restaurants to reopen again. (They'd also have to re-establish consumer confidence in restaurant safety. As said, it's a magic wand.) Then all the restaurant employees will be back at work and people will happily spend the money in restaurants buying the meals they planned on buying anyway.

But if the restaurants are all closed, more stimulus will not help. No amount of money will convince consumers to eat in a closed, unsafe restaurant. Instead of enabling consumers to eat in restaurants, all the stimulus did was pass out little bits of green paper. Consumers can't eat bits of green paper, nor will restaurant employees get their jobs back. This is the opposite of living well--I can't buy what I want, and the waitress can't earn a living. Stimulus doesn't change anything for either of us.

So instead of spending their stimulus checks, many people just put the money in the bank. That's what I did--because I'm retired my income has remained unchanged. Because of lack of supply (i.e., my wife & I can no longer go out to eat) and also because of the government's stimulus check, my bank balance has increased since the pandemic began. This drives up asset prices, such as the stock market. My experience is similar to others who haven't lost their job or otherwise been able to maintain their income. But for "non-essential" workers such as restaurant employees the outcome is very different. Their income has just gone to zero. 

Of course I don't have to save all my stimulus money. While I can't spend it on restaurant meals, I can spend it on something else. In my case home repairs took up a big slice. Others have spent it on used cars--the used car market is quite hot right now. There are a lot of people looking to buy a house, though inventory is very low. And, of course, especially since we can't eat in restaurants anymore, we will have to spend more money in grocery stores.

The result is more money (stimulus plus foregone restaurant meals) chasing fewer goods that remain in supply (cars and groceries). It's a classic recipe for dramatic inflation. Unless bits of green paper suddenly become edible, more stimulus will just make things worse and increase inflation even more.

An article in The Militant entitled Joblessness soars worldwide, spurs working-class resistance by Roy Landersen (likely a pseudonym for the competent Brian Williams) demonstrates this. The graph above reveals the sharp inflation in grocery prices that have resulted from both added stimulus dollars, plus the disruption in the supply chain. Grocery prices have gone up by 2.6%.

Disruptions in the supply chain include this: while restaurants all closed down, grocery stores got more business. The problem is that food for restaurants is not the same thing as food that's sold in grocery stores. For example, many people enjoy eating in Chinese restaurants, but only a few people cook Chinese food at home. So there's now a huge surplus of Chinese ingredients that used to be bought by restaurants but can't now be sold in grocery stores.

The result of all of this is higher prices.

At some level Mr. Landersen understands this; after all, he did compile the graph above. But his proposed solutions are wrong--they amount to Let them eat little bits of green paper. He condemns "paltry government handouts" as being woefully insufficient.

In the U.S., individuals have been forced to skip more than 100 million payments on student loans, auto loans and other forms of debt. A wave of apartment and home evictions loom, threatening millions with homelessness.

He has a point--all these defaults will lead to bank failures, and then we're all toast. So some short-term help for unemployed restaurant workers is appropriate. And that's been done--though it remains to be seen if it's enough. But it shouldn't be called stimulus, and to the extent it adds to the money supply it's inflationary.

Sending an extra "stimulus" check to somebody like me--who has suffered no income loss--is completely counterproductive.

His second suggestion is gonzo:

The Socialist Workers Party calls for workers and their unions to fight for a government-funded public works program to provide jobs at union-scale pay, building things working people need — hospitals, housing, day care centers, schools, and to repair the crumbling infrastructure.

Why build more hospitals when a) we have enough, and b) we don't have the extra doctors and nurses to staff them? Those professions are already in short supply, and jacking up the salaries of doctors and nurses won't help restaurant employees at all. This really is a Let them eat little bits of green paper strategy. It would be massively inflationary.

I want to eat in a restaurant, but Mr. Landersen will force me to buy a new hospital instead. How silly is that?

The solution--the only solution--is to find a way to reopen restaurants, airlines, hotels, and tourism and travel generally. Little green pieces of paper are useful only if there is something consumers want to buy with them.

Further Reading:

• Socialist Resurgence Demands Steep Wage Cuts for Healthcare Workers
• Useful Marxist Economics: Michael Roberts
• The Militant Visits Manila

Left Voice on Trump's Tulsa Rally

I made some changes to This Blog's Beat, i.e., the list of blogs in the right sidebar I promise to cover fairly regularly. I deleted Counterpunch and the Freedom Socialist Party--the former because apart from Louis Proyect's articles I almost never read it, and the latter because it's boring and useless.

Meanwhile, I've added Left Voice (h/t Louis Proyect) which proves to be an interesting rag full of great discussion topics. I previously described it as "published by a collective of New York City college professors virtue-signalling their revolutionary socialism." That was slightly unfair: they're not all professors, some of them are adjuncts, others teachers, then there are grad students, and at least one taxi driver who's probably fallen off the academic ladder somewhere. But they're all educated, intelligent people who have something to say.

The article for today is entitled The Great American Comeback? Trump Resumes His Re-Election Campaign With Bizarre Speech in Tulsa. The author is Ezra Brain, "a NYC based theatre artist and teacher."

Mr. Brain echoes the MSM that Trump is likely to lose in November. The polls are against him, and now even the betting markets are against him. I will point out that both MSM and the polls were wrong in 2016--but being wrong once doesn't mean they're always wrong. I find Biden to be a singularly unfeasible candidate--an incompetent, senile reincarnation of Hillary Clinton. MSM notwithstanding, I can't believe he'll win the election. So I'm still putting my money on Trump.

Mr. Brain mentions Covid:

The rally was controversial from its announcement. To begin with, experts almost universally agree that holding a rally with thousands of people during the current pandemic poses significant risk to all participants.

I agree with him that holding the rally was a risky proposition. I was shocked and disappointed that most attendees were not wearing masks--it makes them look stupid. I'll also note (as Mr. Brain does not) that the arena was only half full, and that the overflow crowd was mostly nonexistent. There are three theories for why:

1. People were afraid of the virus and therefore stayed away. I know I would not have attended.
2. AOC has a theory that a TikTok mob post went viral and inspired folks to reserve tickets without any intention of attending the rally.
3. Scott Adams goes along with the TikTok theory, but suggests it was a Chinese plot--TikTok is a Chinese company.

I dunno--I think virus fear is the most likely culprit. But some version of TikTok foul play may also be possible.

Mr. Brain is obsessed with "dog whistles." These are words and phrases that are presumably used to communicate "racism" to the intended audience, while leaving the rest of us ignorant. But Mr. Brain is on to the scheme, and so acutely sensitive is he to these dog whistles that he thinks he understands Mr. Trump's motivations even better than Trump himself.

For example, Mr. Brain thinks "thug" is a racial term--a connotation that even I, a retired academic and dedicated right-winger, never realized. Thug is defined as "a violent person, especially a criminal." Mr. Trump has almost exclusively blamed white thugs for the looting and violence--first and foremost Antifa, and more recently also white supremacists. He even blamed the white, elderly bozo from Buffalo who got himself knocked over by the cops. I can't recall Trump ever blaming Black street gangs for the problems, even though they were obviously also involved.

Mr. Brain accuses Trump of using "Juneteenth" as a racist dog whistle. By originally scheduling the rally for that day, and then a few days before rescheduling it, Trump has somehow revealed his inner racism. Huh? If he was so racist, why didn't he insist on holding rally on Juneteenth just out of principle?

Then Trump held the rally in Tulsa--site of a racist pogrom against Black people in March, 1921. The problem with Trump is not racism, but rather ignorance--he doesn't read. All his information comes from cable news, and until Juneteenth and the pogrom hit the news networks he knew nothing about them. This is not dog whistling.

It's not just Trump, but also Joe Biden.

The contradictions in Trump’s rhetoric on the uprisings built to a head when he launched a hypocritical full-on assault on Biden’s record on race. Making a series of shockingly salient points, he pointed out Biden’s personal affinity for segregationists, his terrible voting record, and how the economic policies that Biden has long-supported have impoverished Black Americans. The climax of the attack came with Trump declaring, seemingly unaware of the irony that the statement could just as easily apply to himself, that “racial justice begins when Joe Biden retires from public life.” That Donald Trump, with his decades-long history of racism, was able to mount such a valid attack against his opponent is as clear a sign as any that many of the differences between the two parties are cosmetic. Both Biden and Trump are racists ...

I don't see "Donald Trump's decades-long history of racism." Nowhere has Trump demanded a return to Jim Crow. He doesn't advocate the repeal of the voting rights act. He'd oppose any change in the public accommodations law. Unlike Biden, he's never hung out with avowed segregationists. I've never even heard him criticizing affirmative action! Apart from largely imaginary "dog whistles", Mr. Brain has no evidence of Trump's enduring racism.

I don't think Biden is a racist, either--he's just a Democrat. Democrats are fundamentally unprincipled and don't believe in anything except "higher taxes" and "bigger government." Mr. Biden will go whichever way the wind blows on race. He once hung out with segregationists; today he wants to "defund the police."

Neither Donald nor Joe are more racist than the average septuagenarian white guy.

Mr. Brain writes:

It was on statues that Trump most clearly stoked white nationalist sentiment. After first referencing the Confederate statue in DC that had been taken down and burned by protesters the night before, Trump began to make a series of statements about “our heritage.” These remarks directly played to the most radicalized sectors of his base ...He also said the radical left wants to “tear down our statues and punish and cancel anyone who does not conform to their demands.” 

Some statues should be torn down, and some shouldn't be. The distinction needs to be deliberate and sensitive, and the process legal. What is unacceptable is for a mob of Antifa thugs to tear down statues as an act of violence.

He also made the intentionally vague declaration that “We used to have things, we don’t anymore, because we want to be open.” What exactly these things that we can’t have anymore because we want to be open are, he never clarified.

We used to have football games and tailgate parties. We used to go to concerts and theaters. We used to eat in restaurants. Yet Mr. Brain puts this all into his "dog whistle" category. He really is dense--bordering on kookiness.

Of all people, Mr. Brain should hope that Trump's rally is successful. If only a few people get sick, then likely we can open up theaters sooner rather than later. As a theater person Mr. Brain should appreciate that.

Further Reading:

• Trotskyists on Reopening
• Louis Proyect and the More-Poverty Solution
• Our President is a Pacifist

Who Are The Police?

The Trotskyist boilerplate is that the police are agents of the state, which in turn exists to serve the ruling class--the bourgeoisie. John Leslie made that case back in 2017 in an article recently reposted in Socialist Action (around June 1, 2020) in light of the Minneapolis events. He writes

The state does not exist to “reconcile” the interests of the various classes; The state exists for the subjugation of workers and oppressed people by the dominant, or ruling, class. This is expressed in the formation of police, the army, prisons, and other instruments of coercion aimed at keeping working people in line.

At some level this is obviously true. The police certainly are agents of the state, and whether or not the state exists expressly to defend the bourgeoisie, it certainly exists to defend the status quo. Given that the status quo benefits the bourgeoisie first and foremost, perhaps this is a distinction without a difference.

But the distinction does make a difference, for lots of people have a vested interest in the status quo. Any retiree (myself included) definitely depends on the social security checks coming in. Anybody who's bought a house assumes their property rights will be protected. An employee counts on the state to enforce contracts regarding pay and benefits. We all assume that a dollar bill will be worth something tomorrow--and not just tomorrow but thirty years from now--an assumption that depends on the indefinite duration of the status quo. Any serious disruption in any of these institutional arrangements will not likely auger in a better world, but rather the complete collapse of civilization. See, e.g., Venezuela.

It's not that Mr. Leslie is wrong--the police do, above all, defend the bourgeoisie. But they defend almost everybody else, too, and somehow he misses that.

This is illustrated most poignantly by an elderly Black woman living on social security in Minneapolis. She--interviewed by Fox News--was in tears: the grocery store, Target store, and the Dollar General in her neighborhood had all been looted and burned. The buses weren't running and she didn't have car. How was she supposed to buy food and necessities? Where were the police when she really needed them?

But, according to Mr. Leslie, she should be grateful. For the cops have a rap sheet a mile long that disqualifies them from stopping looters and arsonists in Minnesota. A partial list (my comments in italics):

• "The origins of police in the U.S., especially in the South, can be partially traced to the slave patrols formed to catch runaway slaves." The police are mentioned in the 2nd amendment to the Constitution, where they're called a "well-formed militia."
• "In Italy and Germany, during the rise of fascist movements, there was cooperation between police and fascist groups." I'm sure that comforts the lady from Minneapolis.
• "...in Houston, in the 1970s, it was estimated that as many as 40% of the police department were members of the KKK." This is likely not true, and Mr. Leslie cites no reference. Either way, why should Ms. Minneapolis have to go without groceries?
• The racist attitudes of the Philadelphia police department culminated in the May 1985 bombing of the MOVE house on Osage Avenue. ...Rather than use the fire department to extinguish the fire, the decision was made to “let the fire burn” ultimately destroying 61 homes, leaving 250 people homeless, and killing 11 members of the MOVE organization, including five children. This is at least half the truth--I don't know the other half. Mr. Leslie's implication is that cops always and everywhere behave that badly, which is obviously not true.

You get the idea--Mr. Leslie strings together random charges of malfeasance, not all of which are true and none of which reflect the true role of a police department. For every extreme, alt-right racist on the force, there's another guilty white liberal, or Black man trying to improve his own community.

Yet it is seemingly true that the police disproportionately target Black people. Isn't this on its face racism? The answer is no, as this data indicates.

Number of murder victims in the United States in 2018, by race/ethnicity and gender

(excerpts)

	Total	Male	Female
Total	14,123	10,914	3,180
White	6,088	4,255	1,832
Black	7,407	6,237	1,168

Three premises: 1) Blacks are 13% of the population; 2) Homicide counts are pretty accurate since it's hard to hide a corpse, unlike, say, robberies, which often go unreported. 3) Blacks are overwhelmingly murdered by other Blacks, and whites are overwhelmingly murdered by other whites. Therefore the race of the victims (given in the chart) is a very good proxy for the race of the perpetrators.

Note that there were more Black victims than white victims--though for females that isn't true. But using the "total" values, and assuming a perfect relationship between race of victim and perpetrator, one gets that Blacks commit 52% of all murders, or a bit over four times their ratio in the population. (Hispanics are victims in about 15% of murders--roughly in proportion to their population.)

So the cops are not being irrational. It is obvious that Blacks are picked on because they're more likely to commit crimes. Scenes from Baltimore's Westside and Chicago's Englewood neighborhoods support the conclusion. Therefore the anecdotes Mr. Leslie presents are not evidence of "systemic racism" (at least not by police) but rather precisely the opposite--namely an effort by the police to stop crime that hugely and disproportionately victimizes the majority of Black people who are not criminals.

Attentive readers will recall that I claimed the police "defended almost everybody else," in addition to the bourgeoisie. Who is excluded by that almost qualifier?

It's certainly not the proletariat--or more precisely, the lower middle class--people including the Minneapolis retiree. People who work at Target or the grocery store or Dollar General have no interest in being unemployed. Even people who don't work there shop there--and especially for poor people it's difficult and expensive for them to travel far to other neighborhoods. None of these folks benefit from looting and burning their own stores.

Neither the bourgeoisie nor the proletariat benefit from looting and burning--the police are supposed to protect them all. The only people who come out ahead are the lumpen proletariat. They have no money and can't go shopping. They have no jobs--certainly not at Target or Dollar General. So for them--and them only--it's all just free stuff, celebrated by having a big party. No wonder they demand "Defund the Police!"

Wikipedia defines lumpen proletariat this way (emphases mine):

Lumpen proletariat is a term used primarily by Marxist theorists to describe the underclass devoid of class consciousness. Coined by Karl Marx and Friedrich Engels in the 1840s, they used it to refer to the unthinking lower strata of society exploited by reactionary and counter-revolutionary forces, particularly in the context of the revolutions of 1848. They dismissed its revolutionary potential and contrasted it with the proletariat.

So there you have it: Mr. Leslie champions (or at least passively condones) looting of stores by "reactionary" and "counter-revolutionary" forces. What a guy!

And he calls himself a revolutionary.

Down With Poverty!

Further Reading:

• Louis Proyect and the More Poverty Solution
• Book Review: Capitalism Alone
• Jeff Mackler Interviewed by Paul Duddridge