Daily Archives: October 9, 2011
Andy Mukherjee (The Straits Times) The Asia News Network Thu, 10/06/2011 10:46 AM
Civility has been one of the less-mourned casualties of this financial crisis.
Radically different viewpoints on what will put the world economy back on a stable growth path have split the profession of economics into two warring tribes.
You are either with Mr Paul Krugman, the Princeton University professor who won the 2008 Nobel Memorial Prize in economic sciences for his seminal work on trade theory, and a few like-minded economists of deep Keynesian persuasion. Or you are their enemy. There is no middle ground.
Most people equate Keynesian thinking with government control of the economy. The more modern variant of the economics profession that seeks its inspiration in Adam Smith’s invisible hand is equated with private enterprise and free markets.
That is a caricature.
The real difference is that Keynesianism, with its roots in the Great Depression of the 1930s, is concerned with the here-and-now of an economy: When Keynesians see a fire, they want to put it out first and ask questions later.
The non-Keynesians believe that the present is inexorably connected with the future, and unless one can permanently change expectations about the future, tinkering with the present makes no sense. Putting out a flame in one corner of a burning building merely brings the blaze back in another.
It is one thing for physical sciences to live with sharp differences in opinion. Whether light is particle or wave was hotly debated for four centuries. But Mr Thomas Edison’s light bulb did not have to wait for that debate to end.
By contrast, economics is a social science that allocates resources between members of a society and between today’s citizens and future generations. In the absence of a theory that justifies why Peter must be robbed to pay Paul, elected politicians have no basis to enact policy.
Say, United States President Barack Obama, desperate to stimulate the economy, faces a choice. He can spend US$1 million to build a road by taxing Mr Warren Buffett, or he can give Mr Buffett a US$1 million tax break. Mr Obama should select the course of action that gives a bigger boost to the economy. But do tax cuts have a bigger multiplier effect than government spending?
Sadly, economists cannot agree. Indeed, prominent economists like Mr John Taylor, who worked in the George W. Bush administration, did not even buy the claim in 2009 by the Obama economics team that a 1 per cent increase in government spending would increase inflation-adjusted US gross domestic product by 1.6 per cent from what it otherwise would be. The effect would be much smaller, he said.
When Mr Obama recently presented a proposal for cutting payroll taxes, Mr Taylor expressed doubts about Moody’s Analytics chief economist Mark Zandi’s claim that it will create 1.9 million jobs.
“This is the same type of model simulation that predicted the very similar 2009 stimulus package would create millions of jobs, and the same type of simulation that claimed that that package worked,” Mr Taylor noted on his blog last month.
Mr Krugman agrees that the Obama stimulus did not do the job. But in his opinion, it was too small to work.
Nowadays, Mr Krugman, who writes an op-ed column in The New York Times, uses his blog to rain punches on anybody who dares to disagree with Keynesian prescriptions for fighting the economic inferno. As the crisis has deepened, the list of his enemies has grown.
Those at the receiving end of his blows include former Fed chairman Paul Volcker, who recently wrote that the US Federal Reserve was sowing the seeds of future inflation. “Volcker, I am sorry to say, is worrying about refighting the 1970s when we are actually refighting the 1930s,” Mr Krugman responded.
In the 1970s, the US experienced economic stagnation along with galloping prices. Mr Volcker raised interest rates all the way to 20 per cent to kill inflation.
The other side – the non-Keynesians – is not taking Mr Krugman’s assault lying down. “Paul isn’t doing his job. He is supposed to read, explain and criticize things economists write, and preferably real professional writing, not interviews, op-eds and blog posts,” said University of Chicago economist John Cochrane.
The US is hurtling towards another recession, Europe is flirting with a sovereign-debt meltdown, China is slowing and the rest of the world is looking to economists to show the way. And here is what Mr Krugman and Mr Kenneth Rogoff, a former chief economist at the International Monetary Fund, were debating around mid-August on the CNN show Fareed Zakaria GPS:
Mr Krugman: “If we discovered space aliens were planning to attack and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.”
Mr Rogoff: “And we need Orson Welles, is what you are saying.”
Mr Krugman: No, there was a Twilight Zone episode like this…”
Now, The War Of The Worlds, the radio drama about an alien threat that Welles directed and narrated, spooked Americans by its realism. Equally startling is this war of words between economists. It is turning sillier by the day. The debate is now so caught up with settling scores that men with practical ideas stand no chance of being heard. That is dangerous for policy.
The global economy is seriously ill, and the doctors are debating whether John Maynard Keynes was right to assume that consumption was a function of current income or whether Milton Friedman’s intuition that consumption depends on a consumer’s sense of her “permanent income” is a better theory.
The society at large has to express its disappointment: The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is due to be announced on Monday, must be axed. It will not be, but it should.
Anti-intellectualism is an ugly trait. But with their bloodletting, economists have left us with little choice.
Thirty years ago oilman George Mitchell started an American energy revolution when his company took old techniques and applied them in innovative ways to shale gas fields in north Texas.
Hydraulic fracturing and horizontal drilling were not exactly new, but the combination unlocked tremendous reserves of natural gas in the Barnett Shale and, eventually, similar formations across the U.S. Shale names like the Marcellus, Bakken, Haynesville, Utica and Woodford are now synonymous with game-changing gas reserves.
Some so-called experts feared that we might have to import liquefied natural gas from international producers only a decade ago, but now the American supply is estimated at 100 years or more.
Europe is finally taking notice. The continent has begun exploring its own shale formations in the hopes that some measure of energy independence might be gained.
The goal is not freedom from Middle East and Latin American state-run oil entities, but rather Russian suppliers. European economic and clean-air interests might be linking up about shale even as U.S. regulators are giving the practice a harder look here.
The evidence is cropping up almost everywhere. Halliburton fractured Poland‘s first shale play well last year, while ExxonMobil is exploring concessions in Germany, joining nations such as Spain and the Netherlands in a search for vast stores of natural gas.
U.S. diplomatic channels are willing to help. The State Department formed the Global Shale Gas Initiative last year, “to help countries seeking to utilize their unconventional natural gas resources to identify and develop them safely and economically,” according to the department’s website.
The Global Shale Gas Initiative so far selected countries with some known presence of gas-bearing shale within their borders, market potential and “geopolitical synergies.” The GSGI partnerships include China, India, Jordan and Poland, where reserves are announced at approximately 1.4 trillion cubic meters.
New coal power is difficult to build on due to stringent environmental politics. Some nations, such as Germany, are either running away from or increasingly wary about nuclear power in the wake of the Japanese tsunami disaster.
Eastern European nations, with still fresh memories of Russian domination, want an option to the oil and gas giant perched near their borders. Some, like France, are opposed to hydraulic fracturing although its energy situation is more settled than other neighbors.
But many nations are willing and eager to consider unconventional drilling options, although opinion is divided on whether the European shales have sufficient permeability to recover massive oil and gas. They look across the pond and see potential oceans of energy independence where little existed before the U.S. shale plays shot up.
- Soros-Backed San Leon Says Polish Shale Gas Profits to Beat U.S. (mb50.wordpress.com)
- UK: Cuadrilla Unveils Huge Shale Gas Find (mb50.wordpress.com)
The potential contract revenue for the one-year period is US$204 million which includes US$18 million in mobilization revenue. In addition, the rig can earn a daily performance bonus of up to 10 percent.
West Leo is currently under construction at Jurong Shipyard in Singapore with delivery scheduled for the end of January 2012. The unit will subsequently start its transit to Ghana where commencement on the Tullow contract is expected in mid April 2012. West Leo will be the second unit of the Moss Maritime CS50 Mk II design that Seadrill puts into operations.
Alf C Thorkildsen, Chief Executive Officer in Seadrill Management AS, says, “We are very pleased to have secured our first deepwater contract with Tullow, a fast growing and dynamic independent oil and gas company. We believe Ghana, which is one of the most promising new deepwater frontiers, may offer significant opportunities for us going forward. We continue to strengthen our revenue backlog and have with this contract secured attractive employment for all our deep and ultra-deepwater units.”
- Tullow Strikes Oil at Enyenra Well, Offshore Ghana (mb50.wordpress.com)
- Tullow Discovers Oil Offshore French Guiana (mb50.wordpress.com)
- ROC Sells Offshore Mauritania Interests to Tullow (mb50.wordpress.com)
There is a sharp reality disconnect in the Black community.
On the one hand, the Black population continues to support the first African American president, Barack Obama, by more than 90%.
Yet the plight of the Black communities is at its worst condition in three decades. Official unemployment is over 16% ― twice that of whites and is about 30% for young African Americans.
Black household income is in decline and the lowest of the five major ethnic groups. Poverty is at the highest levels in 30 years.
Obama’s policies have not benefited the Black community, other minority communities or the working class as a whole. The so-called middle class with decent jobs and incomes are those still able to hold union-level paid jobs. Thousands of government jobs are being eliminated as the far right attacks city, state and federal employment.
The ongoing economic stagnation has devastated these communities. The rich have become wealthier and the top 1% barely feel any pain.
The propaganda war is being won by the right. They are convincing more and more workers that it is not a priority to force the “job creators” (the 400 billionaires) to pay a “fair share” of taxes.
Many workers now believe that social security and Medicare must be modified to “protect” it. A majority of white workers don’t support Obama.
Blacks are not in that group, but have little power when the traditional leaders do little or nothing to lead a campaign for their interests.
When Obama travels, he rarely, if ever, sets foot in the communities of colour. When he talks about the “middle class” he rarely mentions the plight of the people of colour ― he is too afraid of the extremist white backlash.
The Black leadership as a group ― elected officials, heads of civil rights organizations and the academic and intellectual elites ― know full well that the Obama administration has taken few, if any, steps to help the most oppressed and discriminated segments of society.
Even the ongoing campaign by conservatives to limit voter participation ― the greatest attacks on the 1965 Voting Rights Act since its inception ― has brought little response from the Black Attorney General, Eric Holder, or the White House.
When they do mention the assault on voting rights, they refer to seniors and youth, not Blacks.
Yet the Black elites have remained basically silent on this failure of progressive leadership. The main leaders are too concerned that a criticism of Obama will help the white racist elements in the Republican Tea Party and society as a whole.
The far right sees this weakness as the opening to do what they would have never tried under a white president ― Republican or Democrat.
Smiley and West
Two voices of criticism have come from prominent Princeton professor and author Cornel West and veteran journalist and radio host Tavis Smiley (see www.smileyandwest.com). Their criticism has focused on Obama’s failure to fight for the working class and the poor, and deal with the real poverty of the Black community.
West has called Obama “another Black mascot” for “Wall Street oligarchs.”
West and Smiley have been attacked for doing so. Many Black leaders and academics see them as ungrateful, or motivated by personal jealousy or worse. Reverand Al Sharpton, a longtime activist in New York, has become one of Obama痴 staunchest defenders no matter what the administration does. He now has his own television show on MSNBC.
Another academic defender is Melissa Harris-Perry, a former Princeton colleague of West, a columnist for The Nation magazine and MSNBC analyst. She sees West’s criticisms of Obama as primarily “personal” because, supposedly, Obama never “thanked” West for his support.
Others say it is because of his own sour history with Obama economic adviser Larry Summers, a former president of Harvard.
But the real question we should ask ourselves isn’t West’s personal motivations, but this: Are his criticisms valid?
One point West makes is that Obama is not a “progressive politician” and “lacks backbone” to stand up to the right.
In an interview with Playboy magazine in August last year, West stated: “Black folk can’t be blindsided by Obama’s pigmentation and historical symbolism. What I’m saying is I wish he could be more Martin King-like …
“But by necessity, Obama has had to downplay his Blackness to appease the white moderates and independents and speak to their anxieties.”
Whether or not one believes that analysis, it is obvious that Obama rarely speaks to the needs of the Black community or takes any special effective actions to help the poorest communities.
West has joined protests against corporate greed on Wall Street. He’s criticised Obama’s war policies, failures on job creation and capitulations to the right on environmental issues.
The uncritical Obama supporters in the Black community generally steer clear of this type of activism and criticism.
Obama lectures CBC
The Congressional Black Caucus (CBC) ― probably the most influential Black elite organisation ― recently held its annual gathering where Obama spoke. Speaking to this strongly supportive gathering on September 24, Obama spent a lot of time defending his programs and victories.
But what made headlines were his concluding comments telling the Black leaders to stop “complaining” and get to work behind his policies.
“I don’t have time to complain; I’m going to press on,” Obama declared.
“I expect all of you to march with me and press on. Take off your bedroom slippers, put on your marching shoes. Shake it off. Stop complaining, stop grumbling, and stop crying. We are going to press on. We’ve got work to do CBC.”
CBC Chairperson Emmanuel Cleaver of Missouri noted: “If Bill Clinton had been in the White House and had failed to address this problem [of high unemployment], we probably would be marching on the White House. There is less volatile reaction in the CBC because nobody wants to do anything that would empower the people who hate the president.”
Whether the CBC would go after another Democratic president is debatable. But for sure, the Black leadership did press Republican presidents on such issues.
The fact that now that the president is Black, Cleaver correctly reveals, is why civil rights and liberal groups won’t stand up to Obama.
As Congresswoman Maxine Waters of California also noted afterwards, Obama would have never said “stop complaining” to Latino, Asian, women痴 rights, gay rights or Jewish Democratic Party groups and if he had, he would have been roundly attacked.
Best Republican president since Reagan
The fundamental contradiction in US politics is that Obama is probably the best “Republican president” in the modern era.
Obama’s policies on war, the economy and most issues have been to the right of every Democratic president and many Republicans (such as Richard Nixon and Gerald Ford). His Affordable Health Care plan that includes individual mandates comes out of the right-wing think tank Heritage Foundation playbook.
The uses of military drones to kill uncharged US citizens (such as US-born citizens Anwar al-Awlaki and Samir Khan, the young editor of a pro-Al Qaeda publication) who are called “terrorists” are examples of Obama’s use of illegal, unconstitutional actions.
Obama has systematically escalated the use of CIA power more than any president in US history―including Bush. Yet the left mostly sits on the sidelines.
In the economy, the Bush-Obama bailout of the Wall Street banks and Obama’s reduction of tax rates for the rich to the lowest levels in nearly 60 years, while working class real incomes fall, is another case in point.
Attacks on civil liberties and civil rights have escalated over his two years without little serious fightback.
West says he wishes Obama were more King-like. It would be a step forward to be, on social issues at least, more like former Democrat president Lyndon Johnson or even Nixon — both of whom signed laws that actually improved racial equality.
All of Obama’s accomplishments pale when measured to his actual (not rhetorical) pro-Wall Street and US-first “anti-terror” foreign policies. The ruling class has the best man in the White House to advance its agenda. He has effectively demobilised the oppressed communities and liberal left, to an extent that no Republican president could ever do.
Historically, the Black community has been the most willing to fight and stand up to the powers that be, even when appealed to by the liberal establishment to hold back. The Obama effect is new but will eventually wear off.
The substance of what West and other critics say about what Obama represents will begin to take hold. It will be a catalyst for new protests against the ruling power structure.
What’s needed is a movement, like the one Martin Luther King led, that starts with the issues of jobs, war and redistribution of wealth. It must be directed at Wall Street, big business and government.
The Obama factor in the demobilisation of Blacks and others is not likely to wither away before the 2012 presidential elections. Blacks will vote overwhelmingly for Obama, which is why right-wing state legislatures are pushing through all kinds of measures to restrict and suppress Black and minority voting.
But the deepening world economic crisis will eventually lead to bigger responses than we’ve seen so far. If history is our guide, African Americans who suffer the most will once again take the lead in protest and resistance to the rich and far right.
- Congressman Allen West’s response to Obama’s comments at CBC dinner – via Facebook (allenwestrepublic.wordpress.com)
- Race Politics: Obama’s Rift With Black Community, Herman Cain Says Blacks “Brainwashed” (turnergpa.wordpress.com)
- MAXINE WATERS: Obama Got “Carried Away” In Comments About Black Community. Rep. Maxine Waters (D… (pajamasmedia.com)
- Obama can’t win when he addresses black audiences (thegrio.com)
- Obama needs to focus more on black economic crisis (cnn.com)
- Rep. Waters: Obama ‘got carried away’ – TheHill.com (mbcalyn.wordpress.com)
- The Big Beltway Chill (skydancingblog.com)
- President Obama Scolds the CBC & Black Community: “Stop Complaining, Stop Grumbling & Stop Crying” (themoderatevoice.com)
- CBC members react to Obama’s speech on jobs, the black community (politicalticker.blogs.cnn.com)