Yet more notes on populism

"A zero-sum economy leads, inevitably, to repression at home and plunder abroad. In traditional agrarian societies the surpluses extracted from the vast majority of peasants supported the relatively luxurious lifestyles of military, bureaucratic and noble elites. The only way to increase the prosperity of an entire people was to steal from another one. (...) Democratic politics became increasingly workable because it was feasible for everybody to become steadily better off.(...) in the new positive-sum world, elites were willing to tolerate the enfranchisement of the masses. The fact that they no longer depended on forced labour made this shift easier still. Consensual politics, and so democracy, became the political norm.(...) The biggest point about debates on climate change and energy supply is that they bring back the question of limits. If, for example, the entire planet emitted CO2 at the rate the US does today, global emissions would be almost five times greater. The same, roughly speaking, is true of energy use per head. This is why climate change and energy security are such geopolitically significant issues. For if there are limits to emissions, there may also be limits to growth. But if there are indeed limits to growth, the political underpinnings of our world fall apart. Intense distributional conflicts must then re-emerge – indeed, they are already emerging – within and among countries."
Martin Wolf - Financial Times

"In May, the Pew Research Center released the 2005 edition of its Political Typology, a survey that slices the American electorate into nine discrete groups. Unsurprisingly, the core of the GOP's support turns out to be drawn from "Enterprisers," affluent, optimistic, and staunchly conservative on economic and social issues alike. But the so-called Enterprisers represent just 11 percent of registered voters--and apart from them, the most reliable GOP voters are Social Conservatives (13 percent of registered voters) and Pro-Government Conservatives (10 percent of voters). Both groups are predominantly female (Enterprisers are overwhelmingly male); both are critical of big business; and both advocate more government involvement to alleviate the economic risks faced by a growing number of families. They tend to be hostile to expanding free trade, Social Security reform, and guest-worker proposals--which is to say the Bush second term agenda." This is the Republican party of today--an increasingly working-class party, dependent for its power on supermajorities of the white working class vote, and a party whose constituents are surprisingly comfortable with bad-but-popular liberal ideas like raising the minimum wage, expanding clumsy environmental regulations, or hiking taxes on the wealthy to fund a health care entitlement. To borrow a phrase from Minnesota governor Tim Pawlenty, Republicans are now "the party of Sam's Club, not just the country club." Ross Douthat & Reihan Salam - Weekly Standard

David Seaton's News Links
The bottom line that ties together all the above quotes are the taboo words, "class struggle" or what Martin Wolf artfully calls, "intense distributional conflicts."

"if there are indeed limits to growth, the political underpinnings of our world fall apart"

What does Martin Wolf mean by the "underpinnings of our world"? The great (huge understatement) British historian, Eric Hobsbawm, puts it this way in "The Age of Revolution":

"... some time in the 1780s, and for the first time in human history, the shackles were taken off the productive power of human societies, which henceforth became capable of the constant, rapid and up to the present llimitless multiplication of men, goods and services."

This is the world we have lived in since the end of the 18th century, we know no other and it is predicated on limitless growth. Limitlessness is an article of faith, so is optimism. In the article from the Weekly Standard quoted above there is a relevant paragraph on this optimism:

"...the core of the GOP's support turns out to be drawn from "Enterprisers," affluent, optimistic, and staunchly conservative on economic and social issues alike."

I'm sure my readers will have noticed that when ever they talk to one of these "Enterprisers", they invariably pooh pooh any doubts about the sustainability of our system. These people have a taliban-like faith that there will always be a technological solution to any "limit" that might ever pop up.

Until recently this optimism was not confined to the Rotarian, Republican, booster crowd, it was also an article of faith of the left. Every Soviet five year plan that ever was, was filled with this very same optimism. Up till recently the only argument between the left and the right on the question of growth was to whom would fall the privilege of fulfilling mankind's destiny to soar ever upward on the wings of growing productivity... and the right is the last man standing.

At this point, as the evidence of the reality of global warming piles up, most of these optimists are whistling past the graveyard or in denial. Some of them, however, may be prudently planning for the future.

Martin Wolf is the chief economist of the Financial Times and a wonderful journalist. In his work: at international conferences, and over a thousand dinner tables and at countless coffee sessions, he comes into daily contact with some of the most wealthy and powerful men and women in the world and those that serve them. Wolf hears them speak and most of all picks up their body language, their silences and vibrations. His article on "limits", which I am quoting abundantly is the cri de coeur of a man who, though not wealthy and powerful himself, knows the ways of the wealthy and powerful as no other does... with the possible exception of Rupert Murdoch's butler. For the language of a financial newspaper, Wolf practically weeps:

"The response of many, notably environmentalists and people with socialist leanings, is to welcome such conflicts. These, they believe, are the birth-pangs of a just global society. I strongly disagree. It is far more likely to be a step towards a world characterised by catastrophic conflict and brutal repression. This is why I sympathise with the hostile response of classical liberals and libertarians to the very notion of such limits, since they view them as the death-knell of any hopes for domestic freedom and peaceful foreign relations."

If we examine what Martin Wolf is saying logically, not even really reading between the lines, this supremely informed man is declaring that he knows that, before they ever pay Scandinavian like income taxes, drive small cars and wear sweaters around the house on cold winter days, the elites of the United States will create a police state and go to war endlessly to dominate the resource rich areas of the world. Hyperbole? Examine George W. Bush's presidency in that light and perhaps Dubya may not really be as dumb as he looks.. Or maybe he is more like what May West said about Ronald Reagan, "dumb but willing."

At this juncture, the elites of the Republican Party begin to separate from the middle class and working class base and the only way to keep them on board would be endless war and endless fear. Terror and paranoia may be the key to 2008 election. What moldy old Marxists used to call, "false consciousness". The Republican Party, to use another worn but useful Marxist term, has entered into contradiction with itself and using Wolf's analysis as our text, is clearly going to tear itself apart.

Who knows, Huckabee may only be a straw in the breeze, but that is the way the wind is blowing. DS

The secret to Mike Huckabee's success - Salon
Abstract: The miracle birth of the Republican candidate with the four-word name -- Mike Huckabee Iowa Front-runner -- has as much to do with social class as religion. There is nothing subtle about Huckabee's celebration of his humble roots: He gleefully told 150 supporters (some more accurately described as acolytes) in Marshalltown Thursday morning that a "Republican muckety-muck" had recently declared that Huckabee was unelectable because he had a "hick last name." Then, a few minutes later, Huckabee returned to his obsession with the name game. "I didn't grow up with a name that opened a lot of doors or had a Rolodex," he boasted, harking back to his childhood in Hope, Ark. Then, the candidate suddenly switched to a twangy version of an upper-class lockjaw accent as he recalled, "Nobody said, 'Oh, he's a Huckabee, let him in.'" After the laughter died down, Huckabee added, "I often say that for my family, summer was never a verb. We summered in hay fields and chicken yards and all kinds of stuff." Of course, Huckabee is laying it on thick, but the candidate is peddling his common-man persona more than any specific set of policies. This time around, Romney (the governor's son) and McCain (the son of an admiral) lack convincing hard-scrabble stories from their early years. And the Bush family is not exactly the embodiment of portraits in populism. Huckabee, in fact, stole a joke that Jim Hightower famously used to ridicule the elder George Bush at the 1988 Democratic Convention. "Many of you work hard," Huckabee said, as he looked out at the breakfast crowd (not a tie or a dress-for-success outfit in view) at the Best Western in Marshalltown. "That's what America's always been about. It's not about folks who were born on third base and think they hit a triple."(....) But the Democrat whom Huckabee appears to be channeling is John Edwards, who never missed an opportunity to remind voters back in 2004 that he was "the son of a mill worker." At a chaotic rally in a cramped room in a West Des Moines shopping mall Wednesday night, Huckabee lifted a signature Edwards phrase, promising that when he triumphs in Iowa on Jan. 3, "America can say thank you for restoring faith in a political system that's not just run by corporate greed but is run by ordinary citizens." Huckabee followed up in Marshalltown by uttering a line of such naked populism that the Baccarat crystal probably rattled in corporate dining rooms around the country: "Wouldn't it be nice to have a president who doesn't find himself wholly owned and completely tied to the biggest corporations in the country?"(...) In contrast, Romney, on the stump in Iowa in late November, told a joke that literally began, "A man walks into a country club." There may be a social-class barrier that explains why, despite Iowa spending that will undoubtedly top $10 million, Romney risks being upended by Huckabee -- an underfunded candidate whose campaign seems modeled on Judy Garland and Mickey Rooney putting on a "backyard musical." Gail Stecker, who works for a food-safety institute at Iowa State University in Ames, captured the Romney-the-robot problem when I spoke to her before the Huckabee speech. "I went to a Romney rally in July and decided that he's not the man for me," Stecker, who was wearing a festive garland of Christmas lights around her neck, recalled. "When Romney looks at you, he looks right through you like he doesn't care." If Romney falls short in Iowa, that sentence -- "He looks right through you" -- could serve as his epitaph. READ IT ALL

Party's over: uppity Chinese and Indian workers spur inflation

David Seaton's News Links
Gee granddad, is this what Marx called, the "contradictions of capitalism"? What does that mean, exactly pops? Well sonny let's' look at this workmanlike definition from the Online Dictionary of Social Science:

CONTRADICTIONS OF CAPITALISM
The term is associated with Karl Marx (1818-1883) who claimed that capitalist societies suffered from two unresolvable problems that would prevent both social harmony and a stable economic life. First, Marx assumed that the competitive processes of a capitalist market society would lead to a concentration of capital ownership in fewer and fewer hands. Marx built this claim on the assumption, which he holds in common with laissez faire economics, that a competitive economy must lead inevitably to the elimination of some producers by others, there must be winners and losers and the winners would grow increasingly large. Capitalism, Marx argued, contrary to the general assumption of laissez faire economics, had an inherent tendency towards concentration of capital in oligopolies and monopolies. The concentration of capital involved, first of all, the displacement of the handworker and the craftsworker and increasing domination of factory-based technology. An industrial proletariat of wage workers emerged, and grew larger, as independent producers were eliminated by factory-based competition. Capitalist corporations grew more concentrated and larger, the number of individuals owning the means of production became fewer. The class structure becomes polarized and the economic and social conditions of the two opposed main classes more strongly contrasted, leading to political activation of the working class and prolonged conflict with the dominant bourgeois class through political and industrial organization. It is this development of social polarization that provides the unsolveable social or relational contradiction of capitalist society. The social organization of a capitalist society also presented an inherent structural contradiction in the economic dynamics of capitalism. While capitalism revolutionized the means of production by promoting the greatest economic development in human history, its class structure focused the capacity to consume in a tiny minority of the population. The mass social scale of production could not remain compatible with the concentration of wealth in fewer and fewer hands. As a result, there must be inherent instability, or anarchy, in the whole capitalist system of production. The social effects of such instability in turn must intensify the political struggle of social classes hastening the event of socialist revolution.

You'll notice that it all pretty much makes sense until you get to end bit about, "its class structure focused the capacity to consume in a tiny minority of the population." If you live in a developed country this sounds very strange because the great triumph of the system after WWII was to include ever greater numbers of heretofore working class people into a new, property owning middle class. Probably if you have access to the Internet, you feel yourself a member of this class by 'birthright', don't kid yourself, in the USA it took rivers of blood, but that is another story. I also say "if you live in a developed country". Because if you live in a underdeveloped country, the text makes sense as read.... up till "day before yesterday" and maybe still.

Now, however, this phenomenon of the "new" middle class is hitting China and India and may even be timidly approaching parts of Africa... And that is where the system seems to heading into a brick wall.

On one hand we have global warming... Imagine what we'll have to do for air and water if every Chinese and Indian aspires to the life style of the "average American" and if the Africans even dream of making it to the lifestyle of the average Chinese, they better wake up and apologize because otherwise we go directly to "Soylent Green".

And on the other hand, as this article from the Wall Street Journal shows, "Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing."... They are demanding and getting better wages in order to consume, are consuming and inflation is rising. We are just a hop, skip and a jump away from Marx making sense once more. DS

Years of Global Growth Raise Inflation Worries - Wall Street Journal

Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing

By MARCUS WALKER in Berlin, GREG IP in Washington and ANDREW BATSON in Beijing
June 6, 2007; Page A1

For the past decade, low-priced labor from China, India and Eastern Europe has helped much of the world enjoy economic growth without the sting of inflation. Now that damper on prices is beginning to reverse -- and global inflation pressure is starting to build.

Companies in many countries are operating at close to full capacity, facing shortages of everything from land to equipment. Western workers and their low-cost rivals both are winning higher pay, thanks to rising demand. In some cases, the global links of the economy are increasing costs rather than lowering them, as far-flung businesses compete for the same resources.

Central banks are increasingly worried about spare production capacity running out -- which could force them to raise rates to their highest level in years to stave off inflation. That could puncture the ebullience of stock and bond markets, which have become accustomed to a rare combination of fast growth, low inflation and low interest rates.

Already long-term interest rates are on the rise, in anticipation: U.S. 10-year Treasury bonds hit a nine-month high of nearly 5% yesterday. "Markets have gotten used to the idea that the global economy will keep producing downward pressure on prices," says Ken Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund. "But that phase may be ending."

In remarks to a bankers conference in South Africa yesterday, U.S. Federal Reserve Chairman Ben Bernanke said rising Chinese domestic costs could eventually feed through to U.S. imports, but likely would only have "modest" effect. Still, he reiterated that risks to moderating inflation "remain to the upside" in the U.S. because demand is high relative to capacity.

European Central Bank president Jean-Claude Trichet has warned that European industries have little scope left to raise production, and has asked unions to show restraint in seeking wage increases for the overall health of the economy. The bank is expected to raise rates when it meets today.

Germany's engineering sector, the mainstay of its export-led revival, is operating at 93% of capacity, leaving the lowest amount of slack since the 1960s. Amid falling unemployment, Germany's most powerful union, IG Metall, recently pushed through a pay raise of 4.1% to cover much of the manufacturing sector this year.

The Bank of England raised interest rates last month in part because "there might be less disinflationary pressure in the global economy," according to the minutes of the meeting. The cost of consumer goods in the United Kingdom has stabilized after falling persistently for many years under pressure from imports, and more U.K. manufacturers plan to raise prices than at any time since the mid-1990s, according to the Confederation of British Industry.


Even the price of Chinese exports such as furniture and clothing is rising, and provincial authorities there raised long-stagnant -- and still tiny -- minimum wages by an average of 21% last year. Indian outsourcing giant Infosys Technologies recently raised entry-level wages 10% and expects to do so again amid increasing competition for its workers.

To be sure, globalization still is helping contain some price pressures, and growth is still strong. Inflation remains moderate, at around 2% in industrialized countries and not much above 5% in many developing countries. The lack of price pressure has allowed central banks to leave their short-term interest rates 1.25 percentage points lower, on average, than at the peak of the world's 1990s economic boom, J.P. Morgan says -- even though the world economy is growing even faster now.

The flood of cheap imports into the U.S. has benefited consumers there and subtracted about one percentage point a year from U.S. inflation for the past decade, says the International Monetary Fund. Goldman Sachs economists said in a report last week, "There are pockets where inflation has risen more than expected, but the most recent evidence ... is that inflation is receding," especially in the U.S. and Japan.

Still, signs are now multiplying that global growth is fueling inflation rather than restraining it, says Richard Fisher, president of the Federal Reserve Bank of Dallas and a nonvoting member of the Fed's policy committee. "More and more, I hear people complain about the rising costs of [hiring] Indian M.B.A.s or the wages paid to Chinese workers," he says. As an inflation-damper, he adds, global capacity has gone from "tailwind to a headwind."

Bruce Kasman, chief economist at J.P. Morgan Chase, warns investors world-wide have been underestimating central banks' willingness to raise rates to avoid a repeat of the spiraling inflation of the 1970s, the last time the world economy grew as strongly as today. It won't require much higher rates, he says, to "cause significant damage in the markets."

Federal Reserve Bank of Dallas President Richard Fisher, who has long championed globalization's influence on U.S. inflation, says that influence has gone from good to bad. "There is a sense things are more expensive," he said in an interview with The Wall Street Journal.

Global crosscurrents from China and India and other fast-growing developing nations are raising some costs in the developed world. U.S. farmers, for instance, are paying more to export grain because the large ships they use are busy serving China's booming domestic market. The price to use the ships has risen to almost $50,000 a day from $17,000 last year, says Oivind Lorentzen III, president Northern Navigation America Inc., a Stamford, Conn.-based shipping company.

The collision between rising demand and tight supply is evident in Germany, which is leading the 13-nation euro currency area to its fastest growth since the tech boom. Hanover-based tire manufacturer Continental AG says it's struggling to meet extra orders of tires from makers of trucks and cargo trailers, many of whom underestimated the surging demand for commercial transport.

"We're basically sold out," says managing director Hans-Joachim Nikolin. This month, Continental raised its tire prices by up to 5%, partly passing on the cost of natural rubber, which has soared amid high demand from Asia.

The shortage of tires poses a problem in turn for companies like Schmitz Cargobull AG, Europe's largest maker of cargo trailers. The company had planned to make around 44,000 trailers in the year through March, up 30% from the previous year. Instead, it ended up making 52,000 as demand for transporting goods and materials around Europe soared, notably in the fast-growing economies of Europe's ex-communist east. Europe's tire makers didn't have enough tires available to cover the extra production, so Schmitz's purchasing manager Josef Buddenkotte flew to China to buy more tires there to hold down the surge in costs. Schmitz expects to make 65,000 trailers in the year ahead, and has just raised its prices by 3.5%.

Schmitz added a third production shift to cover demand, but with Germany's labor market tightening, has had to pay bonuses to attract enough staff. Schmitz also will have to digest a 4.1% rise in wages this year, under German industry's deal with the IG Metall union.

Demand for wood is booming too, including for the specially treated plywood that Schmitz uses in its trailers. Finnish forestry-products company UPM can't get enough birch timber from Russia at the moment: Mild weather and muddy ground impeded logging this winter, and Russian authorities are planning to raise export duties. "We can serve long-time partners, but new customers can't be served at all at the moment," says Joachim Stinsky, German sales manager at UPM. The price of some of UPM's wood products has risen 20% in the past year, he says.

The rising production costs are passed on to logistics companies that buy or hire trucks and trailers. They too are struggling to meet demand. "The cargo space that's available simply isn't enough," says Heiko Gnam, head of purchasing at Stuttgart-based logistics firm Diehl Spedition. The daily price for chartering a truck has gone up by 10% to 15% in the past year, he says.

In the U.S., central bankers are paying closer attention to the short supply of goods and services around the world. As trade swells, the prices of goods and services are increasingly determined in world markets rather than simply in the U.S. market.

U.S. import prices excluding oil rose 2.9% in the year through April, the fastest clip in 18 months. Employers are boosting wages because despite a slowdown in economic growth, unemployment hovers near a six-year low of 4.5% overall and just 1.9% for professionals. Doug Pruitt, chief executive of Sundt Companies Inc., a Tempe, Ariz., commercial builder, says the long slump following the 2001 recession masked a shortage of skilled professionals that has turned more acute as demand rebounded. He often pays signing bonuses of $10,000 to $20,000 for engineers, project managers, superintendents and estimators.

Labor shortages have constrained Sundt's ability to grow. The company, with annual sales of about $850 million, has turned down $150 million to $200 million of work in the past two years. "I ran this office for 11 years, and we never turned down anything," Mr. Pruitt says. He says he's been charging 12% more than he would have for the same project a year ago.

In China, heavy investment in new factories and infrastructure means the economy is still gaining plenty of new production capacity for the future, a trend that hasn't been stopped by the central bank's modest recent interest-rate increases. Domestic consumer-price inflation there remains low. But labor costs for exporters on the booming coast, who expected to benefit indefinitely from cheap migrant labor to migrate from inland, are going up.

China's export prices rose by 5.3% on average in the year to March, according to China's customs agency, a sharp pickup from a 2.9% gain in the year to last December. Gains are coming both from labor-intensive goods such as textiles and energy-intensive produce like steel. Surveys regularly show that a majority of employers can't fill all of their available jobs, from textile workers in the south to software programmers in the northeast.

At the same time, several hundred million Chinese are still scraping out a living on farms. In theory, they could triple their incomes by taking a job in manufacturing or construction. But the demand for labor and its supply are often not in the same place. In practice, the rural population in the interior can't all move away at once to the coast, where industry and foreign investment are concentrated.

With China's economy looking set to grow by 10% or more for a fifth straight year, employers are aiming to expand their work force by an average of 13%, according to a survey by the labor ministry. That growth is starting to empower workers. Most measures show Chinese wages have been rising by 10% or more annually for several years straight, though rapid gains in productivity have helped contain employers' total labor costs.

Still, migrants from rural areas are getting more assertive: As rising crop prices have boosted farm incomes in the past couple of years, they've also lifted people's expectations of factory life. Prospective migrants are looking for 16% higher wages than a year ago, according to a survey by the Chinese Academy of Social Sciences. "Migrant workers are getting more advanced in their thinking. They are looking at the factory's environment, living conditions, and different kinds of benefits. Now, the workers are the boss," says Hong Yong, who runs a furniture factory in Shunde, Guangdong province.

China's government, under political pressure to address rising inequality, also wants to see higher wages and better social protections for workers. Zhu Changlin, vice chairman of China's furniture makers association, says employers can no longer get away with not paying unemployment insurance and other benefits to staff.

Many furniture manufacturers estimate their labor bill will rise 20% this year, on top of higher costs for wood and other raw materials. Building new factories also is getting more expensive: Land prices are rising as the rapid growth of industrial parks in crowded coastal provinces starts to hit limits.

China also is gradually dismantling administrative practices that have kept prices for electricity, fuel and water far below market levels. In a report this month, China's central bank said the changes would lead to a "certain increase in the overall price level."