It's the Economy, Stupid!

The title of this post is taken from a quote typically attributed to James Carville, a political advisor during the Clinton Administration. It might equally have been attributed to Karl Marx's emphasis on Economic Determinism. The graphic above is from a 2024 PEW Research Center poll which finds that 81% of Voters are primarily concerned with the Economy.  Other issues come in a distant second.

The paradox here is that voters are generally uninformed about: (1) the state of the Economic System, (2) simple ECON 101 Economic Theory, (3) how the Political system works and (4) whether successive political administrations have any impact on the Economic System or are just passive bystanders taking blame for successive economic crises.  The graphic above (click to enlarge) tries to map out some of the confusion.

The basic inputs to the Political System are voting and opinion polls. The things that are under control of decision makers within the Political System are government expenditure (G), Taxation (TAX) and the Money Supply (M). How G, TAX and M affect the Economic System and Economic Outputs are open to argument. And, as I have been arguing here, Shocks to both the Political and Economic Systems are when we find out how, if at all, the two systems work. There should ideally be some Feedback between all this and voting behavior, but there are such long time delays that voters tend to forget causal relationships (see my discussion here).

So, what is the Political System really supposed to do? Here's an old idea that goes back to 17th Century terminology: the Political System is supposed to act as a Centrifugal Governor. The idea also appears in Arnold Tustin's book The Mechanism of Economic Systems (1953). When the centrifugal governor rotates more rapidly it slows down the steam engine, for example. Even if 17th Century Politicians thought this was the way a Political Governor was supposed to work, it no longer is in the 20th and 21st Centuries. The Political System is not supposed to slow down the Economic System.

It is unfortunate that the 17th Century idea of a Political Governor has been lost (we have Neoliberalism to thank), especially since Climate Change has slipped to one of the least important issues for voters. Slowing down the Economic System is one proven way to reduce CO2 Emissions (as was proven during the COVID-19 lockdowns).
 

 

Three Choices of Political-Economic Philosophy in the US Presidential Election

There are a lot of confusing issues swirling around in the current presidential election: gay marriage, abortion, gun rights, immigration, police brutality, racism, women's rights, financial regulation, healthcare costs, foreign wars, social security, money in politics, climate change, etc. etc. All these issues (and new ones that will certainly be introduced to stir the debate) resolve into a choice of three political-economic philosophies. Understanding the philosophies can help you evaluate the political rhetoric and inform your voting.

The three political-economic philosophies that are being offered to US voters are:

• Neoliberalism: The current political-economic philosophy which has been in play since the 1980s but which started to unravel during the Bush II years.
• Neoconservativism: The philosophy of the Republican Party, dominant during the Bush II years.
• Social Democracy: The current version of Embedded Liberalism, the philosophy that dominated US politics from the end of WWII until the 1970s.

If you understand these philosophies, make a decision about which one you support and place the candidates in the philosophy they support, your decisions will be a lot easier. First, follow the links above to understand the philosophies (if this is new territory) then use the following cheat sheet to classify candidates:

The Embedded Liberalism of the post-WWII era failed during the 1970's in the US after a period of stagflation. Neoliberalism ran from the 1980s until the Financial Crisis of 2008. Follow the graphs below to see why Neoliberalism began failing after 2008. The choices are to continue with a political-economic philosophy with this track record (a don't-kill-the-golden-goose strategy for some), re-ignite the Neoconservativism of the Bush II years that ended in Financial Crisis or return to Embedded Liberalism, possibly with some Social Democratic updates. 

These are the political-economic philosophies that seem to be in play in the current US presidential election. Inform yourself, understand the choices, locate confusing issues within the philosophies and it will be easier to motivate support of a candidate and voting. Think of the different philosophies as strategies that might, if pursued, either benefit or not benefit you, the US and the World (not necessarily all the same thing). Vote and support your political-economic interests. To me this is the essence of Democracy since we do not all have the same political-economic interests.

THE TRACK RECORD OF NEOLIBERALISM

Neoliberalism emerged in the 1980's and started failing after the Financial Crisis of 2008 as a result of internal contradictions (Harvey, 2005). Neoliberalism was originally sold on the basis of widely accepted economic theory, a theory used to advise governments on policy. In practice, Neoliberalism did not perform as predicted by it's theory.

The most important consequence of Neoliberalism in the US has been an increase in Income Inequality as measured by the GINI index, plotted in the graph below. Notice that income inequality in the US is approaching levels not seen since then end of the 1920s. During the 1980's, Neoliberalism was sold on the basis of trickle-down theory: policies that benefited the wealthy would benefit everyone. 

If you are a wealthy person or come from a wealthy family, then Neoliberalism has been a great success for you and you should be interested in seeing it continue. If not, your political-economic interests may be elsewhere.

Another chart that displays a similar historical pattern is the share of Gross Domestic Product (GDP) in the Financial Industry, a measure of Financialization (the dominance of US Finance Capital or the power of Wall Street). There are the familiar "twin peaks" in both the inequality and the financialization graphs: one just before the Great Depression and another right before the Financial Crisis of 2008. The important enabling legislation: regulation that separated investing from banking, passed after the Great Depression (the Glass-Stegall Act passed in 1933), was eventually repealed during the Clinton Administration in 1999, nine years before the Financial Crisis of 2008.

If you work in or derive your income from the Financial Sector or live off the earnings of a Trust Fund, it will probably be in your interest to see Neoliberalism continue. If your only contact with the US Financial sector is through high-interest credit card debt and poor returns on savings accounts, your political-economic philosophy might not align with Wall Street.

Just to make clear the importance of the last two graphs graphs and one to follow, in an economic system where growth is "balanced" (a balanced-growth equilibrium or balanced-growth path in Neoclassical Economics), all variables should grow at a constant rate. Unbalanced growth is considered a failure of the economic system typical in "undeveloped" economies. Any policy derived from Neoclassical Economics should not produce unbalanced growth.

A final example of unbalanced growth is the comparison of worker productivity to hourly compensation. The graph below shows that the two started to diverge in the 1970s, again the start of Neoliberalism in the US. Neoclassical Economics, the theoretical foundation of Neoliberalism taught in all major US universities, requires that wages keep pace with productivity, that is, workers should receive their marginal product. 

Other economic theories can be used to explain constant wages or hourly compensation (see the Dual-Sector model of Arthur Lewis or Paul Samuelson's Dissection of Marxian Economics) but Marxian economics is not widely embraced in either Academia or the US Government. Breaking Labor Unions and exporting jobs to low-wage peripheral countries was supposed to benefit workers through trickle-down theory. In practice, the theory was flawed.

Another key part of the Neoliberal philosophy was the placement of all social services in the free-market private sector where competition can supposedly control prices. The result of free-market forces in health care has, for example, been opposite what was predicted. The US saw a large increase in the price of medical care commodities after the Health Maintenance Organization Act of 1973 which was inspired by Neoliberal thinking. If you work in the health care industry and have benefited from these increases in prices charged to consumers, then you will want to see Neoliberalism continue. If you are a consumer of health care services and either have increasingly large co-payments or must pay out-of-pocket medical expenditures, you might favor a political-economic strategy other than Neoliberalism.

The result of market forces in higher education has been a steep increase in college tuition, again starting in the 1970s. If you work in higher education and have benefited from the increases in expenditures, then you would like to see Neoliberalism continue. If you are a college student, a family who wants to send their children to college or a lower ranking employee in Higher Education (non-star faculty and academic staff), you have not benefited from market forces in education and would probably prefer some political-economic philosophy other than Neoliberalism.

Finally, there has been an increase in gun ownership within the US. The trend started after 9/11 (the September 11 Terrorist Attacks on the World Trade Center) and was not a direct result of Neoliberalism. However, the personal freedom and responsibility emphasized by Neoliberalism looks at the trend positively. If you are a gun owner or are concerned about arming yourself defensively, you will probably find Neoconservativism attractive. If you are intimidated by armed citizens carrying loaded weapons in US streets and are inclined to favor gun control, then you will probably find Social Democracy more attractive.

The topic of gun ownership fits well with consideration of US military expenditures. The graph below shows that the US, by far, outspends the rest of the world on the military. It is a cost of being the hegemonic leader of the world system. If you think this level of expenditure is correct or should even be higher, you will be comfortable with Neoconservativism or Neoliberalism. If you think the expenditures are too high then you will probably favor Social Democracy. However, it is important to note that even during the period of Embedded Liberalism after WWII, a high level of military expenditure has always been part of US political culture. The question is whether that should change at this point in history.

EXERCISES

Where candidates fall on the three philosophies is somewhat difficult to determine. Especially if candidates are good politicians, they and their supporters will attempt to obscure their positions to gain votes. I have refrained from putting candidates in boxes for you. You will need to inform yourself on the political philosophies and do your best to make judgment calls. Here are some exercises that might help.

1. Using web sites that compare candidates on various issues (here, here, here and here), try to identify the political-economic philosophies of each presidential candidate (use the table at the beginning of this post).
2. Using candidate's own web sites (Bernie Sanders, Hillary Clinton, Donald Trump, Ted Cruz, Marco Rubio, Jeb Bush, etc.) and the party platforms (Republican Party, Democratic Party or a site that compares all party platforms here) test your understanding of their political-economic philosophies. Compare candidates to their parties.
3. Evaluate past presidents and their administrations (Reagan, Carter, Bush I, Clinton, Bush II, and Obama administrations). How clear was their political-economic philosophy when they entered office? How did their political-economic philosophy change over time, if at all? How easy was it to predict their major decisions based on a political-economic philosophy?

Good luck!

Religious Freedom and the Public Accommodation

The News Hour had an interesting segment last night on the controversy over Religious Freedom Laws being played out in Arkansas and Indiana. The most interesting interchange was between Rev. Tim Overton of the Halteman Village Baptist Church and Micheline Maynard of Arizona State University.

Rev. Tim Overton: Well, I do believe government needs a good reason to interfere with the private practice of religion among our citizens in this country...Our biggest concern with the changes is that Christian-owned businesses or religious-owned business are not going to be able to carry their faith as they would like into the business realm.

Micheline Maynard: Well, you know, Gwen, one of the things about business in the United States is that, when you open your doors and you sell something to the public, I think the principles in this country have been that you welcome all comers.

(Read the full transcript here, emphasis added above.) What the Religious Right Wing wants limited are the concepts of a public accommodation and discrimination under US law. The Civil Rights Act of 1964 and the ADA require that public accommodations must be handicap-accessible and must not discriminate on the basis of race, color, religion, or national origin. Some States extend the Federal law to cover discrimination based upon, race, gender, ethnicity, religion, age, breastfeeding in public and sexual orientation and/or gender identity (read more about the public accommodation here and discrimination here)**. Discrimination is particularly interesting because it involves treating people differently based on their membership in a class. The "different treatment" can either be positive or negative (as Supreme Court Justice Clarence Thomas has has argued in trying to overturn Affirmative Action).

So, let's be clear. The US government should not interfere with either the private practice of religion or the private practice of bigotry. You can discriminate or make all the bigoted statements you want in private. You can even say these things in public settings such as a public church (exempt under public accommodation laws). It's when you move into the public sector that there are more restrictions (e.g., hate speech).

I have repeatedly run into this issue when I have worked in government from people on both sides of the political spectrum. I have always considered public and private acts to be different but a lot of very vocal people and politicians do not. Some on the Right Wing want to regulate private acts in the bedroom or in the physicians office. Some on the Left Wing, advocating for a privacy right, do not want public acts (such as murder or criminal convictions) to be part of the pubic record.  An event that sticks in my mind was to watch politicians on both sides of the spectrum trying to invent reasons to discriminate against the Coptic Christian Church because their community was predominantly of a different religion, both Christian.

Maybe most people do not have a problem rationalizing these concepts when they are in private. It's only when they get into the public sector that the political struggle begins. We're seeing one, maybe inevitable, public fight playing out right now in Arkansas and Indiana. On the other hand, I can't think of any reasons why a right to discriminate should be extend to the public sector under any circumstances. Can you?

**Why the State freedoms listed in this sentence should not be extended to the Federal level is an interesting questions with some obvious answers you can think about. The fact is, they have not been.

Politics, Religion and the Null Hypothesis

We are living in strange political times. Politicians running for president try "...to discern God's calling..." when making political decisions, are anointed as "kings" by fundamentalist ministers or claim that "...our civil laws have to comport with a higher law, God's law". This is all somewhat strange since the separation of Church and State is embedded in Article VI of the US Constitution. Since politicians are claiming divine justification for their actions, it is fair to ask some questions about the basis for that claim.

In science, hypothetical claims are evaluated against a null hypothesis. Scientists ask what is the evidence for a claim such as "divine guidance" and if positive evidence can't be produced then the null hypothesis is considered more likely. In this case, the null hypothesis is that divine guidance does not exists and, more strongly, that the people who claim it are delusional.

I know many wonderful people who are deeply religious but would never claim divine guidance for their actions. If they read this post, I hope they are not offended. But, by claiming authority from God, politicians have forced the question of the basis for that authority. If we're going to make an unbiased inquiry, we have to start from the assertion that it doesn't exist. Then, we can let the evidence take us where it will.



Luckily, PBS Nova has an excellent documentary that looks carefully at the basis for the Bible. Since the Bible is the direct link US politicians claim between themselves and God, in addition to being the justification for policy positions from Abortion to Gay Marriage to Climate Change, looking at the basis for the Bible is the obvious place to start.

To make a very long a contentious story as short as possible, there really is no hard evidence for divine origin of the Bible. The Old Testament was written in Babylon after the Temple of Israel was destroyed by the Assyrians. It was written by men in exile to confront a nagging question: why did their God, Yahweh, forsake them and allow the Temple to be destroyed. The answer was that the Jewish people had, in addition to Yahweh, worshiped false gods before him (recall the second Commandment Thou Shalt have no other gods before me). Let's be clear, this was a guess about why the Temple was destroyed, a rationalization for military failure.

Modern scholarship has been unable to determine by whom or when the Ten Commandments were written but they do appear in the Hebrew Bible, which was written by men in exile. In other words, the Bible is its own source of authority for the word of God. Since there was no written language before the Hebrew Bible (written language being a great contribution of the Jewish people), that's the way it has to be. The Bible is the first piece of written history. It has some accurate parts and some inaccurate parts (described fully in the Nova documentary). It was written by historians, by people concerned with reasserting political power in the Middle East.

We still live in a World concerned with the reassertion of political power in the Middle East. It should be no surprise that US politicians invoke the Bible in their quest for political power. It has worked before and was written for just that purpose. On the other hand, it will probably be a mark of maturity if World civilization can ever move beyond this script. Watching the PBS documentary last night, it was difficult for me not to think that we have been fighting the same religious war over and over again for the last 3000 years. This certainly will not end in my lifetime or maybe ever.

Unfortunately, for the time being, the null hypothesis is most likely: Politicians claiming divine guidance are more likely to be delusional men in search of political power over the rest of us.


QUOTATIONS FROM THE PBS DOCUMENTARY

Read more here about the origins of the written Bible and read the entire transcript of the Nova documentary here.

As modern scholars suspect, the Torah, the first five books of the Bible, takes its final form during the Babylonian exile. But dwarfed by the mighty temples and giant statues of Babylonian gods, the Israelites must also confront the fundamental question: why did their God, Yahweh, forsake them?

MICHAEL COOGAN: In the ancient world, if your country was destroyed by another country, it meant that their gods were more powerful than your god. And the natural thing to do is to worship the more powerful god, but the survivors continued to worship Yahweh and struggled to understand how this could have happened.

PETER MACHINIST: They resort first to a standard form of explanation, which is found elsewhere in the ancient Near East: "We must have done something wrong to incur the wrath of our God."

WILLIAM DEVER: It's out of this that comes the reflection that polytheism was our downfall; there is, after all, only one God.

NARRATOR: The Israelites abandon the folly of polytheism, monotheism triumphs, and the archaeological evidence proves it.