Monday, January 2, 2017

The "Real" Economy Needs Strong Government For Fundamental Investments in True Innovation

We Americans are probably the most propagandized, (brainwashed) people in the world. This is especially true when it comes to "the economy".
We do know that financial fragility for (at least) half our population is a real and growing part of the real economy. But to stay optimistic, we fall all over ourselves to glorify business and entrepreneurship.
Stable businesses, start-ups, new technologies, and entrepreneurs are very important to the real economy, but nowhere near as important as they are in the imaginary economy of ideology and propaganda - especially when it comes to job creation.  
 If it's Economics 101-ist to profess that job creation is a function of consumer demand interacting with entrepreneurship and the public relations effects of advertising, then the obsequious deification of the 1% does not even rise to the level of a developmental (090) level course.
Again, it's not that entrepreneurs like the Steves and Bill aren't important to our economy.  They are.  Very.  But being important still doesn't even make them the equivalent of the tip of an iceberg if you begin to consider the complexity and dynamism of our economy. 
Bill Gates actually deserves credit for more than just Microsoft and his philanthropy.  In a recent Linked-In post, he called for more Federal investment in R&D, acknowledging again what he never (to my knowledge) ever denied: that federally financed research made the microchip revolution possible. The microchip, and a whole helluva lot more!
Bill may never have graduated college (it might have ruined him), but his understanding goes well beyond Economics 101.  This is one member of the .01% who is not an idiot!  Nonsensical propaganda might blithely dismiss the benefits of Federal R&D as transient or "short term", but that's only because (at best) they are only seeing a small part of the "real economy. 
People interested in our economy should read Bill's article. He credits the internet, a lot of pharmaceutical and medical technology, as well as early advancements in solar and wind technology to Federal investment.  (Now, for you Right Wingers, that means tax money! You lefties, will probably want to hear it from the man!  . . .  just scroll to the 6:50 mark).
And no, Bill Gates has not been subverted and mesmerized by the baleful influence of a Noam Chomsky Garden Gnome! He just happens to be someone who knows what the hell he's talking about. It's not that we shouldn't have rich people. It's just that we shouldn't let them ruin our economy.  And if we're taxpayers or workers or consumers, then we built (and keep building) that economy. We built it on top of what our parents built and they built it, on top of . . . turtles all the way down!.
Americans may be bad at math and personal finance, but we're no whizzes with history either. There's many reasons for that. For one thing, if we wanted to understand the real economy, we'd have to acknowledge that the primary accumulation of resources (and therefore capital) came from an incredibly savage conquest involving massacre and germ warfare as we took "our" land from its previous occupants—remember those guys: the one's who learned scalping from us? We'd also have to acknowledge the kidnapping and enslavement of Black Africans—enforced as it was by terror. That's all part of our real economy too. A very honking BIG part! And only the willfully ignorant believe that history stays in the past.
Those dreary and shameful aspects of our economy are only the most obvious part of a growing sum of criminal atrocities upon which our real economy is based. Unfortunately, we've never stopped using genocide and terrorism to accumulate and safeguard "precious" resources.  Study our history in the Mexico, Philippines, Central America, The Caribbean, Italy, Greece, Iran, Indonesia, IndoChina, Iraq, Egypt.  . . .
Or just focus on the history of Honduras and Brazil - and what's going on in those countries right now.
Excessive and increasing monopoly power in industry and finance does inhibit innovation, stifle investment, while keeping prices high and wages low. But monopoly power is a very important part of our real economy too.  It might just be more important than all the hipster entrepreneurs busily "innovating" and spreadsheet fondling in caffeinated "garages" (yeah, right!) and start-up incubators. 
STILL we should also be seriously accentuating the positive and forward-looking aspects of our complex and ever evolving REAL economy.
Truly serious people know that America's "secret weapon" for "job creation" and "stagnation dissipation" is federally funded investment.  History backs them up.
Alexander Hamilton knew that without an activist, interventionist Federal government, the US would never become a fully developed economy and would remain a de-facto colony of the United Kingdom. His tariffs and taxes on whiskey were hotly resented, and even engendered armed rebellion.  
Hamilton's Whiskey Tax was just a single item in his much grander schemes for the nascent U.S. economy. The idea that federal debt could be "as good as gold" not only leaves Econ 101ers in the dust, it raises perplexities still festering today about the very meaning of "reality" in the real economy, now well along the way of evolving beyond paper currency.  No wonder other parts of Hamilton's activist vision for government economic intervention (central bank, protective tariffs) are still fodder for populist conflict and demagoguery.  History, with all its foolishness, thrives in the present.  It never dies.
Being a serious person in the real world, Hamilton understood there are crucial economic functions that surpass the capacities of any private sector actor. The complexities of banking, currency regulation, tax and trade policy have just been alluded to. And no one seriously disputes the reality that the competitive arenas of an economy (called by certain irrepressible boosters the "free market") could not long exist without the rule of law, actively enforced.  Enforcement of contracts and measures to curtail force and fraud only need be mentioned. Once an economy enters its "lift off", anti-trust laws are needed to preserve competition in "free markets" just as mowing is essential to keeping a nice grassy lawn.  (Try not mowing your backyard for a few weeks and see what happens.)  Health and safety protections for consumers and workers regularly (and lamentably) prove their necessity, not just in Appalachian coal mines - or in dodgy dogtreats coming from China.
One of the biggest mystifications about our economy is that it is something separate and distinct from our government. This myth is purposefully promoted by the 0.1% who are far more concerned for their own advantage than for ours. Trump supporters are not wrong when they blame "the government" for rising inequality and stagnating wages. Our economy could not exist without a powerful, interventionist, (and yes, limited) government.  The real questions (and serious disputes) are about how the government should intervene and for whose benefit.  
So let's ignore the reality that government policy since the 1970s has turned from grudgingly supporting the middle class towards energetically transferring wealth from the many to the few. Let's not dwell on the fact that the "middle class" in America, as we've understood it since World War II, is actually a creature of government thanks to the Wagner Act (unions) and other New Deal measures, the GI bill, and home mortgage finance policies.   Let's not be argumentative by pointing out that almost all of the cuts in government spending from the 70s on were directed at programs benefitting the poor and middle class while pouring money into the coffers of those who could hire lawyers for setting up off shore tax haven accounts. Let's pass very lightly over the fact in the 70s, a working class kid could get a manufacturing job that could support a family - or get enough federal and state grants (along with work study and scholarships) to graduate from a four year private college with only $3000 of student loan debt.  Well, let's hover over that tidbit just long enough for that same kid (me) to remember learning in class about how (back then) our elites were getting pretty worried about "entitlements"—and were talking openly (among themselves) about the need to lower job expectations of, and to confront "an excess of democracy".
Let's dwell just a little on how federal investment in basic technology research and development is behind much more than the microchip. To do that we can go back to George Washington in Springfield, Massachusetts. Springfield was on the Connecticut River, but well above the length of it navigable by British warships. That's why he chose Springfield for one of the two planned Federal Armories.  The other was in Harper's Ferry Virginia. 
Let's skip ahead to the Jefferson Administration when an "up and comer" named Eli Whitney stopped by the State Department to demonstrate something revolutionary. Mr. Whitney brought with him the several boxes of assorted machined parts which, with some simple tools, he was able to quickly assemble into working firearms. This was the holy grail of manufacturing as well as the armaments industry. 
Interchangeable parts.
The sticky bit of all that was Whitney hadn't perfected "interchangeable parts" at all.  Sure those demonstration parts had all been ground and filed to the necessary precision to impress Jefferson and Madison. Unfortunately, the actual time and effort required for all that grinding and filing left "interchangeable parts" still much more expensive than making guns the good old fashioned way.
But it was a worthy idea. Even if it was more expensive, there were advantages to being able to fix guns on the battlefield with available replacement parts. So the Federal government invested in "interchangeability", and the Federal Armory at Springfield was where "we" eventually perfected the equipment and processes for the necessary measuring, gaging, grinding, and milling that reified the revolutionary potential of Whitney's brainstorm.
Forgive the pun, but it was a slow and "grinding" process requiring decades of work - and of learning from costly mistakes and experience. All that was far beyond Whitney's resources just as it was beyond the capacity and vision of private venturers who (even then) NEEDED to see a much less glacial return on investment. But when it was made to work, the benefits were quickly exploited by the private sector.
First, while the Armory went on to develop and manufacture the Springfield Rifle, people like Colt, Smith, and Wesson spun off into their own weaponized ventures. Interchangeable parts then spun well beyond savage arms into sewing machines and bicycles and  . . . and . . .  and  . . . (What were those rascally Wright Brothers doing before they started fooling around with flying machines?).
By the way, Harper's Ferry, the federal armory in the South, . . . the folks there just never took to those newfangled "Yankee machine manufacturing" processes, but the handcrafted weapons they made are still treasured for their stylized beauty and artisan charm—until one of their parts wears out.
Railroads wouldn't have been possible without Federal Land grants. The auto industry and Henry Ford's famous assembly line is only an extension of the "interchangeable parts" concept. Would Ford's cars have found a practical market without massive local, state, and federal investment in roads and highways?  And Eisenhower's interstate system?  Did you ever hear that it was built for military purposes?  Think about it.  Back in the 50's practically everything we did was supposedly because of the Soviet Communist Red Chinese menace, but it was always much more about the economy stupid. Remember that earlier bit about propaganda, economics, and foreign policy? It's a subject worthy of study.
Recently the Pentagon announced a large grant to M.I.T. for basic research and development into the next generation of textiles. These new fibers and fabrics will do all kinds of gee-whiz things, but once it’s developed at the tact payer’s expense, the technology will, most likely, follow the usual pattern of real “innovation” in the modern US economy. The foundational "grunt work" of the basic product categories and manufacturing techniques will be granted or licensed to private firms who will have a guaranteed market (G.I. Grunts!), if not guaranteed profit, while they refine and extend the innovations for clothes that change color (camouflage), monitor body systems, store and convert energy, and control temperature. Eventually they'll get the production costs down and invest in some consumer market research. Along the way some clever entrepreneurs and corporate whiz kids will envision or stumble upon all kinds of very cool (including some very useful  . . . like a camera in a phone! . . . whooda thunk it? ) extensions and innovations that might create new billionaires and new industries of employment.
It's not that there is absolutely nothing in the real economy that resembles a "free market".   Just keep in mind that (in the study of Economics) the term is used to describe a pure abstraction often quite useful for modeling and theoretical purposes—and rarely (though it does happen once in a while) for predictive purposes. Our economy, like the nature of physical "reality", constantly generates new possibilities. There really is such a thing as "creative destruction."  And new opportunities are the inevitable flip side of the dangers engendered by periodic crises.  But the "invisible hand" of unintended (sometimes beneficial) consequences arising from the self interested efforts of countless uncoordinated economic actors is not necessarily the most important driver of a successful, advanced economy. (Not if the corporate and financial elite can help it, anyway.  Two things they HATE are competition and uncertainty.  . . . can you blame them?)
As Hamilton (long may he fold on the ten dollar bill!) understood, a successful modern economy requires careful, long range planning. The question is who gets to be in the driver's seats.  One way to exclude unwanted influence is to generate ink clouds of baffling nonsense equating all government planning with Soviet or Maoist style "five year plans" designed to rapidly transform fragile agrarian peasant societies into robust industrial economies at a revolutionary pace. Such planning, not to glorify it, actually was (for billions of people) a brutal but successfully proven road out of serfdom that never had any serious relevance to any historical conditions in the Americas north of the Rio Grande. (Remember, we never had peasants.  We had slaves who were a key component of an international manufacturing industry based on cotton textiles.) China and Russia are now facing more modern types of challenges.
Our economy is centrally planned and driven, but not by an exclusive politburo or some "glow in the dark" conspiracy of Moloch worshipping descendants of the Rothschilds and the Medicis that prance around campfires at the Bohemian Grove or the mountaintops of Davos.  Corporate leaders, like Bill Gates and the Kochs, invest a lot of time, effort, and capital into trying to influence each other as well as towards influencing federal (Hello Pete Buttigieg!) and state public policy with campaign contributions and with lobbyists. They hobnob with central bankers. Most importantly, they work the law through lawyers and the courts.  
Corporations became legal "persons" in the 19th century based on an obscure Supreme Court interpretation of the 14th amendment. In the 1970s the Court equated money with free speech when it comes to campaign finance.  Our current Supreme Court cleverly combined those two legal principles to find that corporate "persons" (the walking "undead") have free speech rights making it even harder to limit their selfish and destructive influence on public policy.
Our corporate/financial elite fund "think tanks" and university departments. They own the media networks and/or fund them through advertising. This has subtle and not so subtle influences over what research gets done, who get professorships, what things are taught are taught in school, and what gets talked about in bars, bus stations, and around espresso dispensers and copy machines.  The 0.1% work hard to create the future by directing public investments and by managing perceptions of our history and present circumstances. 
And they’re messing up.
They’re messing up because they can.
They’re messing up because we let them.
They’re messing up because they can’t help themselves.
I don’t claim to comprehend all the reasons why they can’t help but mess up. Nor can I say that some of them are NOT evil— at least some of the time.  Or that many of them are not stupid. (By the way “stupid” is almost completely distinct from “having low intelligence”.  “Stupid” is emotional.  It’s a condition where emotions can hijack or inhibit intelligence. Sometimes it takes an exceptionally smart person to do something grandiosely stupid).  
As a group, what our elite suffers from is "idiocy".  And if idiocy is mostly just a special form of stupidity, it's still a special category that needs its own attention. 
Idiocy is the failure to see one’s connections to others. It’s the failure to recognize that one’s actions have consequences for others and on the collective. If you think about it, you might understand why our idiot elite (0.1%) tends to hate the word “collective”.
The word “idiot” comes from the Greek.  It meant a person who refused to participate in the public affairs of the polis, the city-state. It was someone who put “I” above the “We”- or who even refused to recognize the “We”. An idiot was a person who saw the cosmos as only “I” and “They” with any “we” restricted to immediate family or close friends and allies. An idiot put his private affairs ahead of the public affairs of state.  In classical times, the citystate of Athens owned Scythian slaves whose job it was to catch out citizens shirking their civic duty to participate in democratic assemblies. The slaves carried thick ropes, soaked in red ochre which they used whack at citizens playing hooky from the ecclesia—leaving scarlet smears that branded such law breakers as “idiots”.
In Latin, the word “idiot” came to mean someone who was ignorant. Later, in the Middle Ages, it was used to describe people with obvious mental or cognitive deficiencies.
But our idiot elite (0.1%) emphatically do not shirk from participation in the civic arena. Unless they are very stupid (and most of them are not VERY stupid), they recognize that they could never do without powerful governments actively intervening in the economy. The ones who are not total idiots recognize that some government intervention is beneficial to almost everyone, and not just them or other members of the 0.1%.
Our idiot elite emphatically does not shirk from political participation. But they're perfectly happy if you do.
Unfortunately (for us, but not so bad for them), most of the important ways government has been intervening in the economy (especially since the 1970s) has been to transfer wealth from the many to the few.
And you want THEM to stop themselves?
We are going to have to rethink a lot of things in the coming decades (with or without trimp as our Great Helmsman). The things to re-envision are going to include not only “job creation”, but “jobs” and the very nature of work itself.  We will also have to reconsider old ideas about “entitlements”, “free riders” and education.
Most of all we will have to reconsider personal and public responsibility for ongoing life-long education, just as we have to reconsider slack and easy attitudes toward our individual responsibility to participate in the political process and civic discourse.  Idiocy is not exclusive to the 0.1%
Our real economy is not a machine that will run of itself. It is just one major facet of a grander political economy with roots extending deep into the origins of our species as social creatures who can use force to dominate one another, but who can also work together to build cultures of good (or bad) faith for coordinating the life efforts individuals who have a claim to dignity and value.



Joe Panzica (Author of Democracy STRUGGLES! and Saint Gredible and Her Fat Dad's Mass.  He is currently working on his second novel I Wanna Be Evil.

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