July 10, 2019

Reviving the Big Labor - Wall Street alliance of the New Deal

In the comments to a post below, there's some discussion of how the Democrats can bring the working class back onto their side and become the dominant rather than opposition party.

In this comment, I review the argument I've been making for awhile here about how the next New Deal phase of the cycle is still a ways off.

But as for nearer-term solutions, I'll just cut-and-paste the comments here. The first is about how de-industrialization has destroyed the upper tiers of the finance sector, as well as the labor unions and working class, giving them a common cause to unite around. The second is about de-escalating the arms race within the finance sector itself, which was begun by the lower and middle-tier finance orgs circa 1980, not the Wall Street investment banks at the top of the pyramid, who only deregulated as a reaction to those below, 20 years later.

If you want to comment, do so to this post, as the other one is old by now and has a moderated comment section.

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Concretely in the short term, unions and populists should highlight to the big banks and central bank how unfair it is that the manufacturers have moved so much production outside the country, where it can't be taxed, leaving Wall Street and Silicon Valley to have to pick up more of the tax tab for funding our government.

And aside from current spending, our government has taken on enormous debt since 1980, compared to surpluses under the New Deal, because mfg owners and their vast working class can no longer be taxed to pay immediately for govt, leading to debt instead.

All that debt will wreck the finance sector -- either by them having to monetize that debt, or by defaulting, either one ruining the credit score of our central bank. Their financial assets become worth a whole lot less (they're denominated in dollars, which become funny-money under such printing schemes).

Also, with less and less real production being done here, the central bank has had to fill the void by injecting more and more monetary stimulus in order to "keep the economy going". But since it's just a bankers' bubble, it's not real, and will pop. That's not an emergency, "lender of last resort" function -- they're being used as an emergency every day for 40 years.

De-industrialization is to blame for that, since industrial-scale manufacturing is an organic and endogenous source of job creation with good wages. No need to stimulate constantly -- only now and again when the credit cycle tightens. (There was not a single bubble during the New Deal era.)

And of course, finance cannot provide the jobs themselves -- they are not labor-intensive, and will never be hiring in large numbers. Only labor-intensive employers can fill the void -- but with de-industrialization, that means shitty service jobs.

Industrial mfg has high profits margins, meaning if employers compete for workers, they have to pass along a lot of that profit to workers in wages. Retail, food, etc., are very low-margin activity, and leave little for employers to pass on. Only industrial mfg is both high-profit margin, and labor-intensive / high employment numbers. That alone can sustain a modern welfare state and economy.

There's likely more to the story, but that's the basic pitch. De-industrialization has thoroughly compromised the finance sector, all the way to the top, in stark contrast to the stable finance system of our industrial mfg heyday under the New Deal.

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As for concrete solutions in finance, the increasing precariousness was caused by deregulation since 1980. And that did NOT benefit the big Wall Street investment banks -- they did not get deregulated until the late 1990s.

Rather, early neolib deregulation was about "liberating" the middle and bottom tier financial orgs to claw their way up the pyramid to take on the stodgy old investment banks. Regional banks like Continental Illinois, the entire Savings & Loan sector, hedge funds, private equity (leveraged buy-out, corporate raiding), barely existed before 1980, let alone were they running riot.

That's who was soaring off the charts during the '80s and most of the '90s. It was all fake, so they kept going bust, but for awhile the investment banks did not have to bail them out. Continental Illinois was bailed out by the FDIC, the whole Savings & Loan sector by a special act of the federal government.

But when a big hedge fund, Long Term Capital Management, went tits up in the late '90s, it was the Wall Street investment banks who had to bail it out. Imagine that -- this new breed of finance animal has been unshackled and eating your lunch for 15-20 years, and then when one of them kicks the bucket, it's YOU who has to pay for their enormous end-of-life services and funeral costs!

Immediately after LTCM's blow-up and bail-out, the investment banks demanded that they, too, be deregulated. If the middle and lower tier were unshackled, then the top tier had to be unshackled, too, in order to keep from going extinct at the hands of the upwardly mobile breeds.

It was only then that Glass-Steagall was repealed, and investment banks allowed to form into mega-banks.

That mega-ness directly caused them to blow up and need bailing out, in 2008. One didn't even make it -- Lehman Brothers. Think of it: every fly-by-night S&L from the '80s got bailed out, and now it was clear the upstart hedgies would always get bailed out. But one of the oldest investment banks on Wall Street? Sorry, don't count on it.

Now our central bank has gotten too big to fail, after jumping on a nearly 5 trillion-dollar grenade in order to "save the economy" after 2008. But it still has 80% of the shrapnel embedded in its body, meaning it can't absorb another blast -- and the next blast will be much bigger than 5 trillion. When the current bubble pops, the Fed will have a whole new order of magnitude of liabilities on its balance sheet, in the 10s of trillions of dollars.

And there is no higher bank to bail out the central bank that prints the world's reserve currency. No central bank of Planet Earth. No central bank of the solar system. No central bank of the Milky Way. No intergalactic central bank. No central bank of all parallel dimensions. This is, at last, the end of the line for bubble-blowing.

In order to de-scale the Wall Street mega-banks, we have to level the middle and lower tier of the finance world. That's where all the problems started. Impose regulations that put those actors back where they belong, where they're not challenging the investment banks at the top. Once its safe, the mega-banks can shrink back into Glass-Steagall style investment banks.

Big labor and their workers will have no problem with any of that. They don't thrive from the S&Ls, corporate raiders, and hedge funds -- if anything, they've gotten downsized into oblivion by them (private equity).

It can be sold as "all actors in the finance sector will be taking on a smaller role, and reining in their deregulated free-for-all behavior". But the real action will be caging up the sub-investment bank tiers, who started the arms race in the first place. De-escalation of the finance arms race -- a nice way to sell it to populists.

Again, only Dems can pursue that -- they're controlled by the Wall Street mega-banks and central bank, while the GOP was controlled by the formerly low/mid-tier finance orgs who wanted to take on the big boys from Wall Street (S&L, private equity).

12 comments:

  1. Can you comment on Jeffrey Epstein?

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    1. Steve Sailer attracts a lot of rightist Israelis and Jews (and their soft and hard detractors) to the comments section of his posts. I recommend the jostling comments here if you already have a familiarity with the case for an idea of the direction this (likely) goes in:
      http://www.unz.com/isteve/jeffrey-epstein-and-foreign-intelligence/

      You have a variety of invested and casual perspectives and some clashing. Of course minor, personal digs and counterdigs come up against a couple lefties by the righties who seemingly have nothing to do with this (Seymour Hersh and Craig Murray) but, that's normal for the personalities involved here so...
      I don't know, but the exposure of it kinda looks like an internal Spy vs Spy, similar to the WikiLeaks 2016 drops, but centered elsewhere.

      Delete

  2. "But as for nearer-term solutions, I'll just cut-and-paste the comments here. The first is about how de-industrialization has destroyed the upper tiers of the finance sector, as well as the labor unions and working class, giving them a common cause to unite around. The second is about de-escalating the arms race within the finance sector itself, which was begun by the lower and middle-tier finance orgs circa 1980, not the Wall Street investment banks at the top of the pyramid, who only deregulated as a reaction to those below, 20 years later."

    It's frustrating to see generic partisanship/hostility toward large/established institutions, when anyone who studies the political culture of the 70's and 80's ought to know that it was libertarian leaning small to mid-sized businesses (and larger firms in conservative aligned industries like manufacturing and agriculture) who were behind the push to open the borders, attack unions, de-regulate, and off-shore. California and Texas were important centers of manufacturing and agriculture in the 70's*, and they were the first states to be demographically transformed by swarms of immigrants by the post-1970 libertarian trend (note also that the libertarian flavor of the American West meant that these states were early adopters of society weakening de-regulation). What this has to do with "the Left" or "Wall Street fat-cats", or teacher's unions, or what have you is beyond me.

    Conservative aligned industries and smaller businesses gritted their teeth in the 1930's-1960's, well aware that "some bad apples" screwed up in the pre-New Deal era and inadvertently drove the public toward greater regulation during that era, so as to maintain credibility in the eyes of the public (after we imported foreign rabble rousers and criminals, and failed to prevent market bubbles and conspicuous consumption in the early 20th century, our elites felt humiliated and motivated to change their tune).
    *Mention to long-time Republicans that GOP leadership did precisely nothing to stop immigration to TX and CA, once Nixon left office, and you get two responses: Crickets, with half-hearted excuses about "liberals" and "big government" getting in the way (meanwhile, those familiar with labor activism know that it was liberals who were most against prodigious immigration in the late 60's). Or they less frequently admit that the GOP ran a big scam starting in the 70's, in which they passed off snake-oil de-regulation as an improvement to society.

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  3. "Concretely in the short term, unions and populists should highlight to the big banks and central bank how unfair it is that the manufacturers have moved so much production outside the country, where it can't be taxed, leaving Wall Street and Silicon Valley to have to pick up more of the tax tab for funding our government."

    The stock conservative response* to this sort of argument tends to be:

    1) Stupid unions and regulators "ostensibly" representing labor bit off more than they could chew in the 60's and 70's, and by doing so they forced manufacturers to off-shore in order to survive in the face of "growing competition". Rebuttal: Continental Europe did far less off-shoring, relatively speaking, and they are no worse off than America is (in some ways, like in terms of equality, they are doing better than the US).

    2) Conservative industries are run by honest and well-meaning people, and we ought to respect them and leave them alone. Whereas lib-aligned industries are skeezy and run by traitors who want to ruin America.

    3) Last, and how could we forget, it's a company's right to conduct business wherever and however it wants. Get the damn gubmint out of everything, it's just a waste of resources and an abuse of power to regulate any industry.

    It does get old hearing people say that "the Left" is responsible for everything going wrong, when any objective reading of historical eras shows that stability is greatest when elites and private industry are reined in, often under threat of Government and Labor further controlling the private sector's activities. Once the de-regulation meme takes off, and is broadly accepted by society (as occurred in the 1980's), nobody (except prepper type 'tards) really thinks that the days of tight regulation will ever come back,so illegal immigration surges (along with the legal variety), companies began merging in order to stifle competition which results in fewer jobs and poorer quality products/services being made available, and cultural obscenity grows (unrated porno and horror movies were big money makers for suburban and small town video stores in the 80's, after being relegated to a handful of theaters and porno shops too sleazy for mainstream consumption, in the 70's).

    *By 2010, even much of the ostensible Left was swallowing Right-wing rhetoric whole and consuming it. Thus, one at this point has to expect both sides to rationalize libertarian sentiment that is antithetical to stability of any kind (geopolitical, economic, cultural).

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  4. Liz Warren wants the opposite: the 2-20% against both the 1% and the 80%. In labels, the professional-managerial class against both the owner class and the working class.

    That's not so different from either Soviet communism (no owner class, but managers directing through their central planning board over the working class), or Yugoslavian market socialism (no owner class, but a market mediates between producers and consumers, with a managerial class still making those decisions within firms).

    So, not surprisingly, the DSA (Democrat SJWs of Astoria) have sprung a boner over Liz Warren all of a sudden, along with most in the media sector. They can tell she represents their class interests the most purely.

    Notice how Warren leaves out Medicare for All -- single-payer a la the rest of the rich countries -- and never talks about unions having more power. It's a technocratic circle jerk for liberal yuppies.

    That way, she doesn't have to improve the lot of the bottom 80%, and she gets to clamp down on the power and wealth of the top 1%, fattening up the ill-gotten parasitic gains of the professional class even more. It's barely different from Reaganism.

    And of course, she was a Reaganite Republican until 1996 -- she was fully on board with the pseudo-populism of letting the professional-class strivers kick off an arms race against the very big boys, while leaving the bottom 80% to rot.

    She calls to break up the big Wall Street banks, but not to put the mid-tier finance orgs back in their cages. She's on the side of those mid-tier players, not the commoners.

    Bernie also calls to break up the Wall Street banks, but also to boost working class power through unions. He's advocating for the bottom 80% against the professional class and the owner class -- ideologically admirable maybe, but unrealistic, since the commoners are not going to take on the entire elite class, let alone in a sustainable way. He needs partners within the elites, just like the New Deal labor movement did.

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  5. Reaganite pseudo-populism was just like that of the Jacksonian's -- they killed the national bank at the top of the finance pyramid, then let the middle and lower tier finance orgs run amok. The era of "free banking," the libertardians' wet dream.

    Constant founding of banks that printed their own money, going bust b/c they were just gamblers with their depositors' wealth, never-ending runs on banks, bank failures one after the other, all throughout the Jacksonian era.

    That was their version of trickle-down economics -- kneecap the very top of the other party's coalition, and gain support of their mid-tier competitors. It wasn't reaching commoners. Same with extending the franchise -- just enough to empower the 2-20% against the 1%, while keeping the 80% in line.

    That's why Jacksonian Dems were as popular as they were outside the slaveocracy of the South -- the mid-tier bank crowd, and those who depended on their patronage, were making ill-gotten gains hand-over-fist.

    Just like the Mitt Romney Republicans making a windfall after the Reaganites deregulated corporate raiding, and making a bunch of professional-managerial class suburbanites rich -- outside of the Reaganite stronghold of the Deep South and Plains states.

    The Lincoln era managed to restore some order to the financial sector's anarchy under the Jackson era, but not really until the McKinley quasi-realignment (quasi b/c it was internal to the same party, the GOP). That was the turn toward the Progressive GOP, who busted the trusts and re-established the national / central bank.

    Reached its pinnacle under the New Deal Dems, who put even the investment banks under Glass-Steagall, with the understanding that the mid-tier would not be deregulated either.

    Hopefully we can at least make Lincoln-style improvements under the coming realignment. But not if pseudo-populist Reaganite dinosaurs like Liz Warren keep ruining the Bernie movement. At the same time, Bernie and Big Labor need to reach an agreement with Big Finance, to de-escalate the finance sector's arms race, and to re-industrialize the economy for the benefit of both the working class and the top of the finance sector.

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  6. The carnivalesque New Deal had the 1% mixing it up with the 80%, while the boring 2-20% had to stew in resentment on the sidelines.

    Killjoy wokescold professionals like Liz Warren and the DSA would never have fit in at Studio 54. That was the last great example of the social-cultural reflection of the material alliance between the tippy-top and the masses against the upper-middle.

    Sorry, there's no meritocratic test you can take to "earn" your way into the disco. You're either a well-rounded party animal, or you're not.

    That zeitgeist even shaded into Danceteria during the early '80s, before Reaganism had totally killed off the material and thereby the cultural alliance of the New Deal coalition members.

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  7. "That was their version of trickle-down economics -- kneecap the very top of the other party's coalition, and gain support of their mid-tier competitors. It wasn't reaching commoners. Same with extending the franchise -- just enough to empower the 2-20% against the 1%, while keeping the 80% in line."

    Here we see that "true" populism recognizes the virulence of the upper middle class who want to gain entry to the higher class, or perhaps rather vindictively, wish to destabilize the "old order" of high elites in order to facilitate renegade booms and busts, and a Dickensian cut-throat culture. Like Sailer has noted, it was common for up and coming "Wall Street" players (who often set up shop not literally on Wall Street) in the 80's to vilify the stable and sober financial big houses of the New Deal era, who were chastised for not succumbing to the Reagan Revolution fast enough.

    In order for society to effectively function, we need the Upper Middle Class to sign a truce with the working class and high elite class; the working class can have a bit more, the high elite can rest easier knowing that 1/5 of the population isn't trying to sandbag them out of greed and spite. This would entail the UMC settling for lower salaries and fewer trinkets, but that's the way it goes. Live with it.

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  8. "That zeitgeist even shaded into Danceteria during the early '80s, before Reaganism had totally killed off the material and thereby the cultural alliance of the New Deal coalition members."

    I don't think late X-ers or Millennials can really appreciate just what life was like in the West, before Reagan's 2nd term. By the late 80's, it really was true that the UMC were splurging on real estate, pricey cars, etc*. The status arms race was heating up, and nothing was supposed to slow you down or get in your way.

    *Heavily Jewish and mostly 1/5er Hollywood was beginning to promote the "staid WASP elite" fantasy in the mid-late 80's, naturally it's the "boring" crypto traditionalist high elites who ought to be the target of our ire, rather than the striving moderate elites loudly pushing people around. Even the current New Right is delusional about the zeitgeist cycle regarding pushy Jews; pushy and irreverent Jews mostly kept their mouths shut in the 1930's-1970's, before opening them back up in the 1980's (complaining about the early 20th century origin of cultural Marxism elides the fact that such garbage remained in the margins for a good 5 decades, then began to creep back in once the 80's became the "full" 80's in 1984-'85).

    I'm also reminded that the core zeigeist factor is stability and moderation. Wholesome and peaceful eras are about things being slow, regular, and traditional. Volatile, excessive, and ugly eras are about removing all restraints from most things, which speeds things up and leads to chaos and frequent derailments.

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  9. "Killjoy wokescold professionals like Liz Warren and the DSA would never have fit in at Studio 54. That was the last great example of the social-cultural reflection of the material alliance between the tippy-top and the masses against the upper-middle."

    Thanks for reminding me that one of the worst aspects of high striving/status obsession is the way that so much ends up being invested in box checking and resume building. Like, we're all in this together and we all breathe the same air, just relax, man. My dad once told me that getting a job in the 70's was pretty simple; for many jobs, it was easy to get a face to face interview, and sometimes the only qualification you needed was having a friendly personality and decent social skills.

    I did digging with the GSS and found that the late 80's is when more people started reporting having Master's and Bachelor's degrees, and is also when more people started attending community college. For what? We're no more smarter or more knowledgeable now than we were in the 70's. However, brandishing a degree as a status totem and as a key to open increasingly secure social and career doors has become the norm because we no longer have an open, equitable, and trusting society.

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  10. "That way, she doesn't have to improve the lot of the bottom 80%, and she gets to clamp down on the power and wealth of the top 1%, fattening up the ill-gotten parasitic gains of the professional class even more. It's barely different from Reaganism."

    So what do we do to instill the meme that focusing on the 1% is a needless distraction (which pro-capitalists helpfully remind us), because they are always going to exist and well, we do need them? In other words, it's ok to have a certain number of elites (which we've always had), but we can't have too many frustrated elite aspirants/wanna have mores trying to undermine society in order to benefit themselves.

    It's a faux-populism to claim that the Great One Percent is conspiring to screw "us" over when so much of the upper middle class professional/managerial class is clearly promoting greedy cut-throat culture.

    Of course, most lower class people intuitively sense that today's would-be revolution starters are grand-standing crusaders for more still-born populism which is really a vehicle to advance the interests of narcissistic yuppies while looking down on anyone who want traditionalism. And you can't fool that many post-Boomers into thinking that yet another fundamentally neo-lib candidate (and the party establishment which favors such) is going to make a difference. Trump won over most non-strivers by telling them common sense, and then the Reaganites, who represent the most flagrant strivers, stabbed everyone in the back just like they've done for the last 35 years.

    Several years ago I was listening to a non-political podcast, and one of the guys on their (from Ohio, BTW) said something like: "Well, who cares about elections, when ultimately they aren't figuring out how to reduce our bills and living expenses". We know that the various striver groups representing each industry have turned society into a dumpster fire, and don't care about stability or the common good. You can only be ripped off so many times.

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  11. Big Tech already avoids paying most taxes themselves so I don't think they would give a shit

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