Karl Marx Was a Tea Partier

Karl Marx, were he alive today, would approve

By Ronald Woods

The first view (held mostly by its detractors) is that Marxism is little more than the politics of resentment — a philosophical justification for the hatred of success by those who failed to achieve it. The politics of resentment offers three different methods for bringing its program of economic jealousy to fruition: Under socialism, the unsuccessful use the power of government to forcibly extract wealth and possessions from the successful, bit by bit until there is nothing left; under the more extreme communism, the very notion of wealth or success is eliminated entirely, and anyone who seeks individual achievement is punished or eliminated; and finally under anarchy, freelance predators would be allowed to steal or destroy any existing wealth or possessions with no interference from the state. Marx himself saw pure communism as the ultimate goal, with socialism as a necessary precursor, and perhaps just an occasional dash of anarchy to ignite the revolutionary fires.

But there is another, more intriguing and less noxious, view of Marxist thought that gets less attention these days because its anachronistic roots in the Industrial Revolution seemingly render it somewhat irrelevant to modern economics. Marx posited that factory workers should own the factory themselves and profit from its output, since they’e the ones actually doing the work — and the wealthy fat cat “capitalists” should be booted out of the director’s office since they don’t really do anything except profit from other people’s labor. Marx generalized this notion to “The workers should control the means of production,” and then extended it further to a national scale by declaring that the overall government itself should be “a dictatorship of the proletariat,” with “proletariat” defined in this context as “someone who actually works for a living.” The problem with this theory in the 21st century is that very few people actually work in factories anymore due to exponential improvements in automation and efficiency, and fewer still produce handicrafts, and the vast majority of American “workers” these days don’t actually create anything tangible. Even so, there is an attractive populist rationality to this aspect of Marxism that appeals to everyone’s sense of fairness — even to those who staunchly reject the rest of communist theory. Those who do the work should reap the benefits and control the system; hard to argue with that.

Although the “factory” is no longer the basic building block of the American economy, Marx’s notion that “The workers should control the means of production” can be rescued and made freshly relevant if it is re-interpreted in a contemporary American context.

Visualize the entire United States as one vast “company,” with citizens as employees and politicians and bureaucrats as managers. Everybody, in theory, works together to make the company successful. But there are two realities which shatter this idealized theory: first, only about half the employees actually ever do any work, while the rest seem to be on permanent vacation or sick leave; and second, our bureaucratic “managers” — just like the wealthy fat cats in Marx’s vision — simply benefit from the labor of others without ever producing anything of value themselves.

Israel and Russia At Odds Over Syria

A dangerous proxy war is developing in Middle East

By John Aziz

Times of global economic disruption or depression have often historically been preludes to war. So too have been periods of geopolitical instability, where new economic powers are rising, and old ones falling. Back in 2008 the United States’ tenture as the sole global superpower appeared to be endangered, and we appeared to be on the cusp of a new multipolar world order.  And at the same time a new demand-side depression bearing some eerily similar characteristics to the Great Depression surfaced. So — even though we were sitting on the back of a huge trend of decreasing war and violence — I was to a small degree worried that this slump might be a prelude to another global conflict.

Luckily — with the exception of a few skirmishes in the middle east following the Arab spring — no such wide-scale global conflict has broken out. The forces of peace have kept the forces of war and chaos mostly at bay. No direct war between the great powers has broken out. Given the high level of trade interdependency and global economic integration that now exists — factors which play a great role in discouraging conflict — that is very good news. Avoiding a new global conflict should be a top priority for policymakers, corporations, and individuals worldwide.

Hopefully, then, the latest friction in the middle east — this time between Israel and Russia — will amount to nothing:

 Israel’s defense chief said Tuesday a Russian plan to supply sophisticated anti-aircraft missiles to Syriawas a “threat” and signaled that Israel is prepared to use force to stop the delivery.

The warning by Defense Minister Moshe Yaalon ratcheted up tensions with Moscow over the planned sale of S-300 air-defense missiles to Syria. Earlier in the day, a top Russian official said his government remained committed to the deal.

There's No Magic Keynesian Bullet That'll Save Europe

The sooner the underlying reality is made transparent and recognized, the lower the long-run cost will be

By Kenneth Rogoff

There is no magic Keynesian bullet for the eurozone’s woes. But the spectacularly muddle-headed argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the “anti-austerity” masses apparently believe that there are easy cyclical solutions to tough structural problems.

The eurozone’s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union. This is not a problem with which Keynes was familiar, much less one that he sought to address.

Above all, any realistic strategy for dealing with the eurozone crisis must involve massive write-downs (forgiveness) of peripheral countries’ debt. These countries’ massive combined bank and government debt – the distinction everywhere in Europe has become blurred – makes rapid sustained growth a dream.

This is hardly the first time I have stressed the need for wholesale debt write-downs. Two years ago, in a commentary called “The Euro’s Pig-Headed Masters,” I wrote that 

“Europe is in constitutional crisis. No one seems to have the power to impose a sensible resolution of its peripheral countries’ debt crisis. Instead of restructuring the manifestly unsustainable debt burdens of Portugal, Ireland, and Greece (the PIGs), politicians and policymakers are pushing for ever-larger bailout packages with ever-less realistic austerity conditions.”

Schaeuble Warns Of "Revolution" If Welfare Model Threatened

This Time Will Not Be Different

by Tyler Durden

Over the weekend, when discussing the latest casualty of Bernanke's disastrous monetary policy, the US corporate pension plan, we touched on a topic that has been a recurring theme on these pages: "the start of the unwind of the welfare myth, if only in the private sector for now, made worse by Ben Bernanke's endless tinkering in what was formerly a free market, should be making the guardians of the status quo very, very nervous... and certainly has the disciples of the Bismarckian welfare state delusion on their toes, because they can see very well what is coming down the road." Moments ago none other than Germany's finance minister, Schrodinger Schaeuble, explained just why this observation is at the core of all modern problem, going so far as using the R-word in the context of Europe (first, and then everywhere else).

From Reuters:

German Finance Minister Wolfgang Schaeuble warned on Tuesday that failure to win the battle against youth unemployment could tear Europe apart, while abandoning the continent's welfare model in favour of tougher U.S. standards would cause "revolution".

Germany, along with France and Italy, backed urgent action to rescue a generation of young Europeans who fear they will not find jobs, with youth unemployment in the EU standing at nearly one in four, more than twice the adult rate.

"We need to be more successful in our fight against youth unemployment, otherwise we will lose the battle for Europe's unity," Schaeuble said.

While Germany insists on the importance of budget consolidation, Schaeuble spoke of the need to preserve Europe's welfare model.

How 3D printing could take over the manufacturing industry

Imagine a machine that could disassemble old unwanted objects, and use the materials to print new objects — all in the comfort of your own home

By John Aziz

The laptop I typed this article on is the culmination of a vast, sprawling, and elaborate process over many continents, using many resources, many people, and many machines.

My laptop's construction incorporates plastics built out of crude oil, metals mined in Africa and forged into memory in Korea and semiconductors in Germany, and an aluminium case made from bauxite mined in Brazil. Gallons and gallons of refined oil were used to ship all the resources and components around the world, until they were finally assembled in China, and shipped out once again to the consumer. That manufacturing process stands upon the shoulders of centuries of scientific research, and years of product development, testing, and marketing.

The manufacturing industry today is a huge mesh of complex processes. Capitalism and the systems that it builds are the product of an evolutionary process gradually adjusting around consumer demand and the imperative of maximizing profit. Just as the internet has revolutionized communications and the distribution of information, new technologies already exist that if widely adopted may do the same thing for manufacturing.

3D printers allow physical objects to be designed digitally and printed using physical materials — mostly plastic, but increasingly almost anything (including human cells). Designs can be shared — or bought and sold — through the internet. Already, there are schematics for cars,homes, guns, sex toys, and all manner of trinkets and household items.

The technology is about 30 years old, but with the costs of the machinery rapidly falling — entry-level, fully assembled 3D printers are now for sale for under $500 — 3D printing is poised to move into the mainstream.

The New Deal Origins of Fannie Mae and the Government-Housing Complex

The Great Deformation

by David Stockman

Fannie Mae is a classic crony capitalist progeny of the New Deal that began life in 1938, quite innocently, as still another ad hoc New Deal program to boost the depression-weakened housing market. It grew into something quite different: a monster that deeply deformed and corrupted the nation’s entire financial system seventy years later.

The policy aim of Fannie Mae was “forcing water to flow uphill” in the residential mortgage market so that low-rate thirty-year home mortgages became available to wage-earning households of modest means. Such mortgages did not then exist for a good reason: they were not economic. No prudent local bank or thrift would take the underwriting risk.

Fannie Mae would thus override the market’s veto by turning local banks and thrifts into government contractors or agents, rather than mortgage debt underwriters. Accordingly, they would be relieved of their aversion to the risk of default loss by means of a Washington-funded “secondary market.” The latter would purchase these commercially unappealing mortgage loans for cash, enabling local bankers to reloan this cash again and again in a government-supported rinse and repeat cycle.

Meanwhile, the default losses that the market refused to underwrite would be shifted to taxpayers, since Fannie Mae’s funding would implicitly depend on the public credit of the United States. The slowly recovering residential housing sector would thus receive the kind of booster shot much favored by the New Dealers.

What Fannie Mae also did, unfortunately, was to start the home mortgage market down a slippery slope. This included separating the loan origination process from the long-term servicing and ownership of the resulting mortgage, in an alleged financing “innovation” that would give rise to predatory mortgage-broker boiler rooms a few generations down the road.

Solar Road Panels Offer Asphalt Alternative

A Crazy, Brilliant Idea

By Sören Harder

An American couple has found a surprising alternative to conventional asphalt motorways: solar road panels. In addition to providing electricity, saving oil and melting fresh snow, it could also prevent accidents.

A lot of thought is put into how much energy we use to drive from point A to B. But what if the road itself could generate energy? Julie and Scott Brusaw, a married couple from Sandpoint, Idaho, have taken on just such a concept, which they hope will make the auto transport of the future cleaner and safer.

The idea is as simple as it is ingenious. Wherever roads are laid, solar panels could go instead. They would generate electricity, which would in turn be fed into the grid. Thus, oil is conserved twice: Electric cars could be charged with the energy produced by the panels, and the panels would replace the use of asphalt, the production of which requires petroleum.

Moreover, Solar Roadways, as the Brusaws have dubbed their invention, are heated and equipped with integrated LED screens, which act not only as street markings, but can also show warnings directly on the road.

The Brusaws are aware that their vision cannot be realized in a day. They've decided to start small: with pedestrian and bicycle paths or large parking lots at supermarkets. As they see it, every square meter of asphalt that gets replaced with Solar Roadway is a small step on the path toward independence from fossil fuels. The giant leap would be to take on urban roads and highways on a global scale.

Peak Collateral

Once we had fiat money. Today we have super fiat, ultra fiat and super ultra zero-content fiat.

By David Malone

I wonder if we are reaching what we might call ‘Peak Collateral’?  That state when the creation of assets, which the market will accept as collateral, is insufficient to sustain the demand for credit.

It’s funny isn’t it, how the terms we use, or are encouraged to use, have such an influence on how an analysis unfolds. So much of the eventual conclusion is already encoded in them. Especially the terms we are encouraged to choose as our starting place. Our leaders and the bankers have been so very concerned that every analysis begin and end with liquidity. But I think it is becoming clearer by the month that collateral is a more revealing term.

When Lehman Brothers and AIG collapsed was it just a shortage of liquidity? No of course not. That’s like saying a man with the plague died of a high temperature. Certainly he had a temperature when he died but it was a symptom not a cause. Both Lehmans and AIG were running out of collateral and without collateral for the oxygen of repo and short term funding, they began to suffocate. Once those two began to choke, the money ran out for others. The collapse of Depfa and Hypo in Germany/Ireland, for example, was a direct result of them not being able to get the funding they relied upon from their sugar-daddy funder, AIG. That created a domino effect. AIG had run out of assets that it could pledge as collateral. It could not raise money that it could then use to lend to HYPO/Depfa. Hypo in turn had such poor assets they too had little or no chance of anyone accepting them as collateral.

It seems to me we are moving back to a similar situation.  You might ask, out of sheer exasperation, how it could be, given all the tough talk and all the new requirements for capital and risk management? How, after all the bailing outs and now ins, all the endless and global QE, all the new rules and capital buffers, that we do not seem to have really got anywhere?

The image that comes to my mind is of the strange attractors which govern the lives of any non-linear system. And global finance is certainly made of many such non-linear systems.

This is the Lorenz attractor that governs convection in liquids and is thus one of the attractors which makes our weather both unpredictable and relatively stable. And it is this unpredictability within parameters which is one hall-mark of non-linearity.

Some Cracks in the Cult of Technocrats

There is no such thing as pure policy, and we should check our pockets and lock our doors when someone tells us otherwise

By CHRYSTIA FREELAND

We are living in the age of the technocrats. In business, Big Data, and the Big Brains who can parse it, rule. In government, the technocrats are on top, too. From Washington to Frankfurt to Rome, technocrats have stepped in where politicians feared to tread, rescuing economies, or at least propping them up, in the process.

Technocrats are in vogue within the intelligentsia, too. It is well nigh impossible to pick up a book about any social or political issue nowadays (including, I hasten to admit, my own) without coming across some data-heavy social science research. And the familiar pleas for common sense and a centrist approach, free from the taint of ideology, usually boil down to a call to put the technocrats in charge.

Technocrats have a lot to recommend them. We do, after all, live in the age of Big Data, and ignoring it or not being able to use it is a sure path to either bankruptcy or humiliation — witness the data jock extraordinaire Nate Silver and his legendary smackdowns of columnists who rely on anecdote and intuition.

But, particularly in the wake of 2008, a global crisis that technocrats both helped cause and failed to predict, there are also sound reasons not to rely mechanically on technocratic solutions. That’s why it is worth reading a new paper by Daron Acemoglu of the Massachusetts Institute of Technology and James Robinson of Harvard University.

In their seminal 2012 book, “Why Nations Fail,” Dr. Acemoglu and Dr. Robinson offered a powerful new framework for understanding why some societies thrive and others decline — those based on inclusive growth succeed, while those where growth is extractive wither.

Their new study, “Economics Versus Politics: Pitfalls of Policy Advice,” will be published later this year in the Journal of Economic Perspectives and is available now in draft form as a National Bureau of Economic Research working paper. It tackles an essential subject in the age of technocracy — the limits of technocratic thinking as a basis for policy.

The myth of the anti-Muslim masses

The left’s expectation of a post-Woolwich racist backlash reveals its own anti-working class prejudices

by Tim Black 

As soon as it became clear on Wednesday afternoon that soldier Lee Rigby had been killed in Woolwich by a couple of jihad-spouting losers, you could almost hear the excited salivation of the nominally left and liberal. They expected, perhaps even wanted, what they see as Britain’s rising right, frothing with anti-Muslim sentiment, to respond. And respond they did, as 90 or so supporters of liberal-left bogeyman, the English Defence League, turned up at Woolwich for a few lagers, several chants and a scuffle with the police. 

It didn’t matter that the EDL’s evening out in Woolwich was numerically insignificant. For left-leaning sections of the political and media class, a few blokes in England football tops and Stone Island jackets was enough to confirm what they already know: the nation’s working class, especially its white members, are increasingly consumed by racist, predominantly anti-Muslim sentiment. You see, the EDL is never grasped as a minority interest group, with fewer supporters than the majority of football clubs take to away games. It is seen as the vanguard of the new fascism, the advance warning of the racist storm brewing among Britain’s white working class.

Over the weekend, the various tips of Britain’s ‘Islamophobic’ iceberg continued to be sighted, aided and abetted by the EDL who staged a few demonstrations around the country, including one outside Downing Street attended by nearly 1,000 supporters. On top of this, various media outlets started carrying headlines like this one from BBC News: ‘Woolwich murder sparks anti-Muslim backlash.’ They were drawing upon a statement from Faith Matters, a UK campaign group dedicated to combating ‘extremism and interfaith and intra-faith tension’. Faith Matters claimed that since the Woolwich attack, 193 ‘anti-Muslim incidents’ had been reported, including 10 assaults on mosques.

A letter to Paul Krugman

Reinhart, Rogoff Strike Back At "Hyperbolic" Krugman

Dear Paul

Back in the late 1980s, you helped shape the concept of an emerging market debt overhang.  The financial crisis has laid bare the fact that the dividing line between emerging markets and advanced countries is not as crisp as once thought.  Indeed, this is a recurring theme of our 2009 book, This Time is Different:  Eight Centuries of Financial Folly.  Today, the growth bind of advanced countries in the periphery of the eurozone has a great deal in common with that of emerging market economies of the 1980s.

We admire your past scholarly work, which influences us to this day.  So it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks.  You have attacked us in very personal terms, virtually non-stop, in your New York Times column and blog posts.  Now you have doubled down in the New York Review of Books, adding the accusation we didn't share our data.  Your characterization of our work and of our policy impact is selective and shallow.  It is deeply misleading about where we stand on the issues.  And we would respectfully submit, your logic and evidence on the policy substance is not nearly as compelling as you imply.

You particularly take aim at our 2010 paper on the long-term secular association between high debt and slow growth. That you disagree with our interpretation of the results is your prerogative.  Your thoroughly ignoring the subsequent literature, however, including the International Monetary Fund's work as well as our own deeper and more complete 2012 paper with Vincent Reinhart, is troubling.   Perhaps, acknowledging the updated literature-not to mention decades of theoretical, empirical, and historical contributions on drawbacks to high debt-would inconveniently undermine your attempt to make us a scapegoat for austerity.  You write 
"Indeed, Reinhart-Rogoff may have had more immediate influence on public debate than any previous paper in the history of economics."

Setting aside this wild hyperbole, you never seem to mention our other line of work that has surely been far more influential when it comes to responding to the financial crisis.  Specifically, our 2009 book (released before our growth and debt work) showed that recoveries from deep systemic financial crises are long, slow and painful.  This was not the common wisdom at all before us, as you yourself have acknowledged  on more than one occasion.  Over the course of the crisis, and certainly by 2010, policymakers around the world were using our research, alongside their assessments, to help justify sustained macroeconomic easing of both monetary and fiscal policy fronts. 

We have to talk about the bystanders

We must discuss the chilling fact that people casually watched and photographed the aftermath of a brutal murder

by Brendan O’Neill 

In the miles of commentary about last week’s horrific stabbing to death of a soldier in Woolwich, few have commented on one of the most chilling sights of that bloody day: the audience of 60 to 70 bystanders, voyeurs even, who watched or filmed the attack or its aftermath. There has been much discussion of the three women who did, very bravely and at great personal risk, intervene in events to try to calm the knifemen down. But far less is being said about the others, the impromptu photographers and tweeters, whose instinct seemed to be to record and comment on what they were seeing, rather than try to do something about it.

No doubt part of the reason we’re uncomfortable with commenting on the almost nonchalant manner in which people raised their phones to film what they were witnessing is because none of us knows how we would have reacted if we’d been there. Would we also have watched? Or would some of us have been brave enough to remonstrate with the knifemen, perhaps even charge them with makeshift weaponry: a bin, a piece of masonry, a knife from a nearby cafe? We don’t know. We like to think we’d have done something heroic, but all sorts of strange emotions and considerations can kick in in the heat of a terrible moment.

However, there’s no denying that there was something deeply troubling about the way a large group of inactive voyeurs observed the attack or its immediate aftermath. While some of the people caught up in this chaotic act will have been understandably confused or scared, it simply can’t be the case that the reason the crowd stood watching is because they were frozen with fear or shock. After all, some provided a live commentary on the bloody events via their Twitterfeeds, the most famous (or infamous) tweet being: ‘I just see a man with his head chopped off in front of my eyes!’ The fact is that a fairly substantial group of people watched a very unusual and very violent event as if they were watching a cricket match. And that is worrying; it matters and should be talked about.

Some have noted and tried to explain the strange voyeurism in Woolwich. The best known of the three heroic women – French-born former teacher Ingrid Loyau-Kennett – has expressed shock that during the eight minutes she was talking to the killers, a large crowd formed, and none of them did anything. She says she is disturbed that lots of people seemed only to want ‘to watch and record the unhappiness of others… watching like it’s on TV’. She thinks this reflects a lack of caring, a dearth of social bonding in modern society. ‘I prefer the values of the past [over] the non-values of today’, she says, ‘where most people don’t seem to give a damn about others’.

The real roots of homegrown terrorism

Blaming shadowy Islamist groomers for ‘radicalising’ young Muslims ignores problems closer to home

by Frank Furedi 

In recent years, the process through which individuals come to embrace violent terrorism has increasingly been understood in terms of the idea of radicalisation. Last week’s brutal knife attack in Woolwich is no exception, with many claiming that the two attackers, Michael Adebowale and Michael Adebolajo, were radicalised Islamic militants. And now UK home secretary Theresa May has warned that thousands more young people are at risk of a similar radicalisation.

The idea of radicalisation, in this telling, resembles an infectious pathogen that can mysteriously infect a multitude of angry young people. The antidote to the radicalisation disease therefore seems obvious: block extremist messages on the internet, regulate the media and ban radical groups from expressing their views.

A new type of ideological threat

Official anxiety about the spectre of radicalisation represents a radical departure from the way in which terrorism was conceptualised in the past. Until recently, terrorism was represented as a form of politically motivated violence, whose sole purpose was to foment fear in the target society. Today, terrorism is no longer understood as merely a physical threat, a capacity to wreak mass destruction. It is also endowed with moral and ideological power over significant sections of the domestic population. As the response to the Woolwich killing shows, terrorism can apparently incite others to copycat behaviour. In short, terrorism can radicalise people.

The idea that modern terrorists exercise a great influence over the minds of sections of the public, invests the terrorist threat with an unprecedented power. Sir David Omand, the former UK security and intelligence coordinator, went so far as to claim that ‘the most effective weapon of the contemporary terrorist is their ideology’ (1). The notion of the terrorist as a purveyor of ideas marks a shift from previous conceptions of terrorism. Indeed, the idea that the terrorist does not just scare people but potentially appeals to their hearts and minds is completely at odds with traditional definitions of the terrorist threat. It is only recently that terrorism has been conceptualised as an effective vehicle for ideas.

This is why, increasingly, the battle for moral authority has become an important part of the war against terrorism. Yet it is difficult to avoid the conclusion that the political and cultural elites of Western societies feel less than confident about conducting a successful campaign on the battlefield of ideas. Their apprehension about the powerful attraction of radical ideas on sections of the domestic population often betrays a deeper problem: namely, that they cannot convince others of the superiority of their own way of life.

A “New Deal” for Europe’s youth?

Awesome

BY ERIKA JOHNSEN

The youth unemployment situation across much of Europe is bleak, to say the least; young people in Greece are unemployed at a rate that just shot past 60 percent, while more than half of Spain’s young people are jobless and more than 40 percent are jobless in both Ireland and Portugal. These kinds of numbers mean that young people are being increasingly thwarted in trying to start their careers and develop the skills they’ll need to survive and thrive for the rest of their lives, which in turn stunts the European economies’ prospects for getting back to a healthy long-term outlook. It’s quickly turning into a vicious and self-perpetuating cycle, and the problem has not gone unnoticed by Europe’s oh-so-august financial ministers — who have lately been cooking up a plan to try and get young people back in the game.

The “New Deal for Europe” will free up EU resources to pay for language courses and fund jobseekers’ flights around the continent in search of work. …

Carsten Brzeski, senior economist at ING Group in Brussels, said: “Merkel and Schaeuble know very well that the future of the euro is not just decided in Brussels or Berlin, but on the streets of Madrid, Athens and so on.”

“High youth unemployment combined with hatred for Germany can turn into populism and nationalism quite quickly and, in the extreme case, lead to an end of the currency union.”

Under the plans, finance from the European Investment Bank will be made available to encourage job creation at small and medium sized businesses. …

Said German Chancellor Merkel on the matter:

Brave New World

Once you sacrifice the first innocent man then the rest are an inevitable consequence

By Richard Fernandez 

A survey in Australia ^[1] found that “close to 50 per cent across all age groups disagreed with the statement that marriage is an outdated institution.” What is remarkable is that anyone should think it would be. For much of human history, individuals relied on themselves, pairings, families, extended kin (or tribes) and the broader cultural and linguistic context of the nation to provide them with stability and safety. Families of some sort have formed the basis of social organization from the beginning of the species. And so too did Home; the hearth at which could be found the “ashes of their fathers and temples of their gods”. Only in the last hundred years has dependence consciously been shifted to the institutional state.

But the institutional state is now bankrupt. It is bust. Living on borrowed money, unable to sustain itself with shrunken birth rates. As a result, whole populations are finding the “safety nets” on which they counted on shot through. Ripped to uselessness even while the institutions which used to shelter humankind for eons are no longer in evidence. The Japanese have coined the term parasaito shinguru ^[2](“parasite single”) to denote a person who has made no family plans of his own, confident in the belief that the state would support him in his old age.

They fought arithmetic at the behest of the welfare state, and arithmetic won.

The result over time in Japan has been a “super-aging” ^[3] society unprecedented in history. “By 2030, one in every three people will be 65+ years and one in five people 75+ years.”  And the economic implications of that collapse mean that the “universal coverage in public pension and health insurance [achieved] in 1961″ will be without any means of support.  Japan has been living on deficit spending for decades. Today it spends 25% of its state budget on meeting interest payments on bonds alone. And now for the first time the interest on those bonds is rising. The game is up, or nearly so.

A Deadlier Disaster for the Third World: Unemployment

Economic freedom is the road that the wealth of nations travels

by George Reisman

The recent collapse of a garment factory building in Bangladesh, resulting in the death, at latest count, of more than 1,100 workers who were employed there, has led to international outrage not only against the building’s owner but also against the various retailers in the United States and Europe, many of them prominent, that have sold clothing produced in that building. It is demanded that they assume responsibility for working conditions in the factories that supply them and not deal with factories that do not provide safe and humane conditions and pay fair wages.

Such demands rest on the belief that, if left free of government interference, the profit motive of businessmen or capitalists leads them to pay subsistence wages to workers compelled to work intolerable hours in sub-human conditions. And, more, that the profits wrung from the workers in this way exist in the hands of the capitalists as a kind of disposable slush fund as it were, at least some more or less substantial portion of which can be given back to the workers from whom they were taken, or used on behalf of those workers, with no negative effect except to deprive the capitalists of some of their ill-gotten gains. It is generally taken for granted that the reason the kind of conditions that prevail in Bangladesh and the rest of the Third World do not exist in the United States and Western Europe is the enactment of labor and social legislation, and that what is needed is to extend such legislation to the countries that do not yet have it.

Every aspect of this set of beliefs is wrong and its consequences are highly destructive, above all to the masses of workers in the Third World who already live close to starvation and who are in danger of being driven into it by needlessly increasing the cost of employing them either by arbitrarily raising their wages or by requiring that they be provided with improved working conditions that must be at their expense and which they cannot afford.

America Is Turning Into ‘Blade Runner With Food Stamps’

It doesn’t have to be that way

By James Pethokoukis

Walter Russell Mead outlines two possible futures for middle-class Americans: one where most of us lose “the race against the machine,”the other where smart government policies enable an eventual successful transition to an economy where IT and robots do a shockingly large percentage of the jobs humans do today — but the carbon-based life forms still have plenty of meaningful work to do.

Mead calls that first scenario, “Blade-runner with food stamps.” Mead:

It’s likely that an information age welfare state would consist of two components: straight out welfare and “social inclusion” payments for some, subsidized make-work jobs (like Postal Service employment in an age of email) for others. …

If the information economy works like this, the whole country would start looking more like California and New York City: unbridgeable class divides, huge inequality, fountains of innovation, and tiny islands of great wealth and privilege surrounded by proles on the dole. Inside the glittering bubble, the digirati and their courtiers would live lives of intense purpose and excitement.

Outside the bubble, meaning would be the good in scarcest supply. . … Bellies will be full, but lives will be empty, and with that emptiness will come ills of every kind: addiction, brutality, ugly, and stunted sexual and emotional lives for many, neglect of the young and the old.

But it doesn’t have to be that way, Mead writes. We can have a future of rising wages, plentiful middle-class jobs in the IT age. His suggestions:

1. “First, make hiring easy and cheap.” Get rid of employer-based social insurance and pension programs. Let government pay for the employer’s share of social insurance out of general tax revenues.

2. “Put the service economy and especially small business and entrepreneurship front and center.”  Barriers to entry must fall. Regulation that make it difficult to start a business or enter a profession must be reformed.  ”Zoning and housing policy should look for ways to encourage homes to be used as workplaces as well as living spaces.”

Lenin was right

And now the WWI Allied role in the Middle East is unraveling

by Patrick J. Buchanan

The thrice-promised land it has been called.

It is that land north of Mecca and Medina and south of Anatolia, between the Mediterranean Sea and the Persian Gulf.

In 1915 – that year of Gallipoli, which forced the resignation of First Lord of the Admiralty Winston Churchill – Britain, to win Arab support for its war against the Ottoman Turks, committed, in the McMahon Agreement, to the independence of these lands under Arab rule.

It was for this that Lawrence of Arabia and the Arabs fought.

In November 1917, however, one month before Gen. Allenby led his army into Jerusalem, Lord Balfour, in a letter to Baron Rothschild, declared that His Majesty's government now looked with favor upon the creation on these same lands of a national homeland for the Jewish people.

Between these clashing commitments there had been struck in 1916 a secret deal between Britain's Mark Sykes and France's Francois Georges-Picot. With the silent approval of czarist Russia, which had been promised Istanbul, these lands were subdivided and placed under British and French rule.

France got Syria and Lebanon. Britain took Transjordan, Palestine and Iraq, and carved out Kuwait.

Vladimir Lenin discovered the Sykes-Picot treaty in the czar's archives and published it, so the world might see what the Great War was truly all about. Sykes-Picot proved impossible to reconcile with Woodrow Wilson's declaration that he and the allies – the British, French, Italian, Russian and Japanese empires – were all fighting "to make the world safe for democracy."

Imperial hypocrisy stood naked and exposed.

Wilson's idealistic Fourteen Points, announced early in 1918, were crafted to recapture the moral high ground. Yet it was out of the implementation of Sykes-Picot that so much Arab hostility and hatred would come – and from which today's Middle East emerged.

Nine decades on, the Sykes-Picot map of the Middle East seems about to undergo revision, and a new map, its borders drawn in blood, emerge, along the lines of what H.G. Wells called the "natural borders" of mankind.