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Schama: Are the Guillotines Being Sharpened?
from Yves Smith at Naked Capitalism
From Ilargi at the Automatic Earth - As goes the nose, so go the toes
from Yves Smith at Naked Capitalism
Simon Schama tonight warns in the Financial Times that revolutionary rage is close to the boiling point in Europe and the US :
Severe financial crises result in a permanent decline in the standard of living. For some citizens, that has come through contracts being reneged, in particular, pension cuts. Other people see their savings in tatters and have no realistic prospect for being able to fund their retirement. And for many of these individuals, the odds of finding continuing, reasonably paid work are low. Even before unemployment soared, people over 40 face poor job prospects. The idea that the middle aged cohort can earn back losses to their nest eggs is wishful thinking. And the young are not much better off. New graduates also face a hostile job market. Worse, students often went into debt to finance their education, believing the mantra that it was an investment.
And many of the societies suffering these financial shocks have already suffered a great deal of erosion of their underlying support structures. Even before the crisis, in the US and other advanced economies, social bonds have eroded in a remarkably short period of time, roughly a generation and a half. Job tenures are short; employees and employers have little loyalty to each other. Ties to communities are weak. Many families have two working parents, so career and parenting demands leave little time to participate in local organizations. Advanced technology frequently offers an easier leisure outlet than trying to coordinate schedules with time (or financially) stressed friends. But marriage and families are also not the haven they once were, given high divorce rates.
One oft unrecognized factor is that alienation and social stress are directly related to income inequality. This is hardly a new finding, but it seldom gets media coverage in the plutocratic US. And it has concrete, measurable costs. As Michael Prowse explained in the Financial Times:
Note in particular where Japan sits on the chart. Some readers have argued that the US has little to fear from deflation and a protracted period of near-zero growth, since Japan is orderly and prosperous-looking, despite its relative decline. But Japan was and is the most socially equal major economy, and during its crisis, it observed the Schama prescription of sharing the pain. The US, the UK, and to a lesser degree, Europe, have done the exact reverse, with both the bank rescues and austerity measures effectively a transfer from ordinary citizens to financiers.
As James Lardner pointed out in the New York Review of Books in June 2007, even before the wheels started coming off the economy, the social contract in the US was pretty frayed, but a concertedpropaganda campaign PR effort promoted the fiction that it was the best of all possible worlds:
Historians will tell you there is often a time-lag between the onset of economic disaster and the accumulation of social fury. In act one, the shock of a crisis initially triggers fearful disorientation; the rush for political saviours; instinctive responses of self-protection, but not the organised mobilisation of outrage…
Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that “Someone Else” must have engineered the common misfortune….At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.
Schama knows this terrain cold; his chronicle of the French Revolution, Citizens, made clear what a bloody affair it was. Even so, his account in the Financial Times in some key respects understates the degree of dislocation suffered by many in advanced economies. Schama depicts the crisis-induced change as merely the end of rising expectations, but the shock is deeper than that. Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that “Someone Else” must have engineered the common misfortune….At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.
Severe financial crises result in a permanent decline in the standard of living. For some citizens, that has come through contracts being reneged, in particular, pension cuts. Other people see their savings in tatters and have no realistic prospect for being able to fund their retirement. And for many of these individuals, the odds of finding continuing, reasonably paid work are low. Even before unemployment soared, people over 40 face poor job prospects. The idea that the middle aged cohort can earn back losses to their nest eggs is wishful thinking. And the young are not much better off. New graduates also face a hostile job market. Worse, students often went into debt to finance their education, believing the mantra that it was an investment.
And many of the societies suffering these financial shocks have already suffered a great deal of erosion of their underlying support structures. Even before the crisis, in the US and other advanced economies, social bonds have eroded in a remarkably short period of time, roughly a generation and a half. Job tenures are short; employees and employers have little loyalty to each other. Ties to communities are weak. Many families have two working parents, so career and parenting demands leave little time to participate in local organizations. Advanced technology frequently offers an easier leisure outlet than trying to coordinate schedules with time (or financially) stressed friends. But marriage and families are also not the haven they once were, given high divorce rates.
One oft unrecognized factor is that alienation and social stress are directly related to income inequality. This is hardly a new finding, but it seldom gets media coverage in the plutocratic US. And it has concrete, measurable costs. As Michael Prowse explained in the Financial Times:
…..if you look for differences between countries, the relationship between income and health largely disintegrates. Rich Americans, for instance, are healthier on average than poor Americans, as measured by life expectancy. But, although the US is a much richer country than, say, Greece, Americans on average have a lower life expectancy than Greeks. More income, it seems, gives you a health advantage with respect to your fellow citizens, but not with respect to people living in other countries….
Once a floor standard of living is attained, people tend to be healthier when three conditions hold: they are valued and respected by others; they feel ‘in control’ in their work and home lives; and they enjoy a dense network of social contacts. Economically unequal societies tend to do poorly in all three respects: they tend to be characterised by big status differences, by big differences in people’s sense of control and by low levels of civic participation….
Unequal societies, in other words, will remain unhealthy societies – and also unhappy societies – no matter how wealthy they become. Their advocates – those who see no reason whatever to curb ever-widening income differentials – have a lot of explaining to do.
Yves here. If you look at broader indicators of social well being, you see the same finding: greater income inequality is associated with worse outcomes. From a presentation by Kate Pickett, Senior lecturer at the University of York and author of The Spirit Level, at the INET conference in April:Once a floor standard of living is attained, people tend to be healthier when three conditions hold: they are valued and respected by others; they feel ‘in control’ in their work and home lives; and they enjoy a dense network of social contacts. Economically unequal societies tend to do poorly in all three respects: they tend to be characterised by big status differences, by big differences in people’s sense of control and by low levels of civic participation….
Unequal societies, in other words, will remain unhealthy societies – and also unhappy societies – no matter how wealthy they become. Their advocates – those who see no reason whatever to curb ever-widening income differentials – have a lot of explaining to do.
Note in particular where Japan sits on the chart. Some readers have argued that the US has little to fear from deflation and a protracted period of near-zero growth, since Japan is orderly and prosperous-looking, despite its relative decline. But Japan was and is the most socially equal major economy, and during its crisis, it observed the Schama prescription of sharing the pain. The US, the UK, and to a lesser degree, Europe, have done the exact reverse, with both the bank rescues and austerity measures effectively a transfer from ordinary citizens to financiers.
As James Lardner pointed out in the New York Review of Books in June 2007, even before the wheels started coming off the economy, the social contract in the US was pretty frayed, but a concerted
To gain their political ends, the robber barons and monopolists of the Gilded Age were content with corrupting officials and buying elections. Their modern counterparts have taken things a big step further, erecting a loose network of think tanks, corporate spokespeople, and friendly press commentators to shape the way Americans think about the economy…. the new communications apparatus wants us to believe that our economic wellbeing depends almost entirely on the so-called free market—a euphemism for letting the private sector set its own rules. The success of this great effort can be measured in the remarkable fact that, despite the corporate scandals and the social damage that these authors explore; despite three decades of deregulation and privatization and tax-and-benefit-slashing with, as the clearest single result, the relentless rise of economic inequality to levels so extreme that since 2001 “the economy” has racked up five straight years of impressive growth without producing any measurable income gains for most Americans—even now, discussions of solutions or alternatives can be stopped almost dead in their tracks by mention of the word government.
Yves here. Having weakened faith in government and made considerable progress towards creating a social Darwinist paradise of isolated individuals pitted against each other, the oligarchs may be about to harvest a whirlwind.
It's possible that unequalled-in-our-times historian Simon Schama carries sufficient authority to have people heed his words. It’s probably more likely, though, that those for whom Schama’s bell intends to toll will react in the spirit of Joey Ramone's best rock 'n roll lines ever, the equally unequalled "I don’t care about history; 'cause that's not where I want to be".
For all the talk about the Great Depression and its self-professed scholars, experts and historians, precious little seems to have truly sunk in that has the weight to counter the "This time it's different" meme. Which is a bad idea, since, as Schama knows like few others, when it comes to rhyming, history can rival Shelley, Keats and Shakespeare sonnet for sonnet. We would all do well, our politicians and wealthiest most of all, to heed the picture Schama paints:
The modus operandi prevalent in Washington, to let the well-to-do culpable police themselves, whether they be Goldman Sachs or BP, carries an enormous political risk. And rightly so, because there is no indication anywhere to be seen that says this line of -in-action is in the best interest of the people who put their trust in the man.
White House Press Secretary Robert Gibbs may stammer some incoherent syllables on what the law does and does not allow the president to do, but none of that will amount to zilch once nobody can deny any longer that 10 or 20 times as much oil has been leaking, and still is, than both BP and the American government have been claiming all the way back to April 20.
Obama himself should have been on site from the earliest possible moment, taking advice from the best people he could find in the entire world, just in case BP was not telling the truth (for which it had great incentives), and just in case a worst case scenario would unfold when it came to closing the leak.
Exactly in the same way that he has shown while dealing with the financial quagmire the nation, and indeed the world, is sinking ever deeper into, Obama has proven one thing to everyone who cares to look and listen: He is not a leader. He simply lacks the qualities and the instinct required for the position. Which is a shame, for his voters, his followers and the nation as a whole; nonetheless, it's time to stop kidding ourselves.
For all the talk about the Great Depression and its self-professed scholars, experts and historians, precious little seems to have truly sunk in that has the weight to counter the "This time it's different" meme. Which is a bad idea, since, as Schama knows like few others, when it comes to rhyming, history can rival Shelley, Keats and Shakespeare sonnet for sonnet. We would all do well, our politicians and wealthiest most of all, to heed the picture Schama paints:
The world teeters on the brink of a new age of rage
Ilargi: Hear, hear. Unfortunately, Obama has elected to sit on his hands for over a month, and only then call a commission together to look into the true impact of the gusher in the Gulf of Mexico that threatens to be a disaster like few before, both within the United States and internationally. How he wishes to explain his 4 weeks not doing much of anything at all to the people of Louisiana, Alabama, Florida, Cuba and Mexico is hard to envision. [..] in Europe and America there is a distinct possibility of a long hot summer of social umbrage.
Historians will tell you there is often a time-lag between the onset of economic disaster and the accumulation of social fury. In act one, the shock of a crisis initially triggers fearful disorientation; the rush for political saviours; instinctive responses of self-protection, but not the organised mobilisation of outrage. [..]
Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? [..]
[..] the psychological impact of financial regulation is almost as critical as its institutional prophylactics. Those who lobby against it risk jeopardising their own long-term interests. Should governments fail to reassert the integrity of public stewardship, suspicions will emerge that, for all the talk of new beginnings, the perps and new regime are cut from common cloth. Both risk being shredded by popular ire or outbid by more dangerous tribunes of indignation.[..]
Those on the receiving end of punitive corrections - in public sector wages or retrenched social institutions - will lash out at their remote masters. Those in the richer north obliged to subsidise what they take to be the fecklessness of the Latins, will come to see not just the single currency, but the European project as an historic error and will pine for the mark or franc. Chauvinist movements will be reborn, directed at immigrants and Brussels dictats, with more destructive fury than we have seen since the war.[..]
Claims that Washington has been captured for socialism are preached on right-wing talk radio as gospel truth. As they did in the 1930s with Father Coughlin, the radio demonisers are pitch-perfect orchestrators of hatred for listeners in bewildered economic distress. Against this tide, facts are feeble weapons.
[..] if his government is to survive the November elections with a shred of authority, it will need Barack Obama to be more than a head tutor. It will need him to be a warrior of the word every bit as combative as the army of the righteous that believes it has the Constitution on its side, and in its inchoate thrashings, can yet bring down the governance of the American Republic.
Historians will tell you there is often a time-lag between the onset of economic disaster and the accumulation of social fury. In act one, the shock of a crisis initially triggers fearful disorientation; the rush for political saviours; instinctive responses of self-protection, but not the organised mobilisation of outrage. [..]
Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? [..]
[..] the psychological impact of financial regulation is almost as critical as its institutional prophylactics. Those who lobby against it risk jeopardising their own long-term interests. Should governments fail to reassert the integrity of public stewardship, suspicions will emerge that, for all the talk of new beginnings, the perps and new regime are cut from common cloth. Both risk being shredded by popular ire or outbid by more dangerous tribunes of indignation.[..]
Those on the receiving end of punitive corrections - in public sector wages or retrenched social institutions - will lash out at their remote masters. Those in the richer north obliged to subsidise what they take to be the fecklessness of the Latins, will come to see not just the single currency, but the European project as an historic error and will pine for the mark or franc. Chauvinist movements will be reborn, directed at immigrants and Brussels dictats, with more destructive fury than we have seen since the war.[..]
Claims that Washington has been captured for socialism are preached on right-wing talk radio as gospel truth. As they did in the 1930s with Father Coughlin, the radio demonisers are pitch-perfect orchestrators of hatred for listeners in bewildered economic distress. Against this tide, facts are feeble weapons.
[..] if his government is to survive the November elections with a shred of authority, it will need Barack Obama to be more than a head tutor. It will need him to be a warrior of the word every bit as combative as the army of the righteous that believes it has the Constitution on its side, and in its inchoate thrashings, can yet bring down the governance of the American Republic.
The modus operandi prevalent in Washington, to let the well-to-do culpable police themselves, whether they be Goldman Sachs or BP, carries an enormous political risk. And rightly so, because there is no indication anywhere to be seen that says this line of -in-action is in the best interest of the people who put their trust in the man.
White House Press Secretary Robert Gibbs may stammer some incoherent syllables on what the law does and does not allow the president to do, but none of that will amount to zilch once nobody can deny any longer that 10 or 20 times as much oil has been leaking, and still is, than both BP and the American government have been claiming all the way back to April 20.
Obama himself should have been on site from the earliest possible moment, taking advice from the best people he could find in the entire world, just in case BP was not telling the truth (for which it had great incentives), and just in case a worst case scenario would unfold when it came to closing the leak.
Exactly in the same way that he has shown while dealing with the financial quagmire the nation, and indeed the world, is sinking ever deeper into, Obama has proven one thing to everyone who cares to look and listen: He is not a leader. He simply lacks the qualities and the instinct required for the position. Which is a shame, for his voters, his followers and the nation as a whole; nonetheless, it's time to stop kidding ourselves.
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