Things to Read on the Evening of September 1, 2014

Must- and Shall-Reads:

• Jonathan Chait: Feast of the Wingnuts
• Steven Greenhouse: More Workers Are Claiming ‘Wage Theft’
• Peter Watts: Are We There Yet? En Route to Dystopia with the Angry Optimist

1. Paul Krugman: Inflation, Septaphobia, and the Shock Doctrine: “The bad news from Europe is a reminder that the basic insight some of us have been trying to convey, mostly in vain, ever since 2008 remains valid: the great danger facing advanced economies is that governments and central banks will do too little, not too much…. Yet the power of the hard money/fiscal austerity orthodoxy (yes, market monetarists want one without the other, but they have no constituency) remains immense. Why?… The one percent (or actually the 0.01 percent)… have much more to gain from asset appreciation than they have to lose from the small chance of runaway inflation. In fact, if you compare stock prices in the US, with its aggressively easing Fed, with Europe, you can see the difference…. An alternative is selective historical memory. Some time ago Kevin Drum suggested that it’s all about septaphobia, fear of the 1970s…. Finally, there’s the notion that it’s implicitly about politics: crises are a chance to force “reforms” that strip away worker protections and the welfare state, and any suggestion that technical solutions, monetary or fiscal, could do the job is rejected. The thing is, it sure looks like a form of false consciousness on the part of elite. But I’m still trying to figure it out.”

2. Bloomberg View: Stopping Europe’s Descent Into Deflation: “Until recently it was debatable whether Europe’s economy was recovering. No longer. Its recovery has stopped. The question now is whether the stagnation will tip over into something worse…. The preliminary estimate of euro-area inflation in August from a year earlier is 0.3 percent…. There’s no growth in the euro area…. What can the ECB do? Draghi says the bank has already acted…. Yet the package of measures the ECB unveiled in June didn’t amount to much…. It’s past time for Draghi to push through those difficulties and test the limits of what politics and the law will allow…. Europe also needs to rethink its fiscal policy…. If Europe’s long recession gets worse, it will be because its leaders saw what was happening yet chose not to act.”

3. Mark Thoma sends us to Justin Fox: What Unions No Longer Do: “Forty years ago, about quarter of American workers belonged to unions, and those unions were a major economic and political force…. This isn’t exactly news… What doesn’t get talked about so much, though, are the consequences…. Jake Rosenfeld,… is out to change that. His book What Unions No Longer Do…. [H]ere, for Labor Day, are the four big things that, according to Rosenfeld, unions in the U.S. no longer do: 1. Unions no longer equalize incomes…. 2. Unions no longer counteract racial inequality…. 3. Unions no longer play a big role in assimilating immigrants…. 4. Unions no longer give lower-income Americans a political voice…. The decline of unions in the U.S. has often been painted as inevitable…. But… that still leaves those tasks unions once accomplished–which on the whole seem like things that are good for society, and good for business–unattended to. Who’s going to do them now?”

4. Free Exchange: Germany’s Hyperinflation-Phobia: “John Maynard Keynes, as early as 1919, recognised the threat inflation posed to modern capitalist societies: ‘Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency… [he] was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.’ The German public, it seems, is particularly fearful of letting inflation getting out of control. This is, in part, due to the legacy of the German hyperinflation of 1922-3…. Present discomfort within Germany with policies designed to reflate the euro-zone economy has been stoked by the assertion of a linkage between hyperinflation and the rise to power of the Nazis…. Yet academics paint a very different picture… than the story… in the German press. The Nazi party did not become a popular political force until long after the hyperinflation period ended. The Nazis only won 32 Reichstag seats in the election of May 1924, and just 12 in 1928. As Paul Krugman has pointed out, ‘the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation’ of the early-1930s…. The hyperinflation of 1923 created winners and losers among the middle classes…. Middle-class votes subsequently splintered between several different parties…. Yet virtually all classes lost out when Brüning’s government reacted to a projected fiscal deficit and gold outflows in 1930 with deflationary policies…. The experience of deflation made Hitler’s promises to conquer unemployment and stabilise prices by any means necessary attractive to a wide range of groups…. Deflation is now a greater risk than inflation in Europe…. A selective memory of the past may prove worse than no memory at all…. [See:] T. Balderston (2002): Economics and Politics in the Weimar Republic… A. Fergusson (1975): When Money Dies: The Nightmare of the Weimar Hyper-Inflation… J. M. Keynes (1919): The Economic Consequences of the Peace… A. Tooze (2006): *The Wages of Destruction: The Making and Breaking of the Nazi Economy… F. Taylor, (2013): The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class“

5. Jared Bernstein: On Labor Day, a call for courage: “especially by those of us, and I include myself, who are shy to the point of apologetic about what needs to change, about re-balancing labor’s power with respect to that of capital. That framing itself… has become a ‘no-no’ in polite company… ‘class warfare’… Marxism. Rep. Paul Ryan (R-Wis.) argues that framing the argument this way is akin to ‘preying on the emotions of fear, envy and resentment’ and ‘sowing social unrest’. It’s a fascinating counterattack…. It is not incidental that budgets written by Ryan propose to cut trillions in spending on those in need and trillions in taxes on the wealthy. And to do so at a time when the share of income going to the top 1 percent is twice what it was before inequality began inexorably climbing (households in the top 1 percent now hold 22 percent of the national income compared with 10 percent in 1979). I reject the arguments of those bemoaning class warfare when they themselves are envoys of the winning class…”

6. Morgan Housel: You Are the Problem: “Here’s the truth: The last five years will probably be the best five-year period you’ll ever experience as an investor. The last decade has been average. If you’ve struggled through this period, or keep telling yourself that buy and hold doesn’t work, or that the market is a scam, it’s your own fault. Stocks have done over the last decade what stocks have done for countless decades: offered a pretty decent return with lots of volatility mixed in the middle. The fact that the average investor has been oblivious to this progress shows that the average investor is participating in a game he or she does not understand and doesn’t agree with. That’s unfortunate. But it means there’s a simple answer to all the stories you hear about investors not trusting the market: the market isn’t the problem. You, and your expectations, are the problem. You are your own worst enemy…”

Should Be Aware of:

• Ken Liu: The Litigation Master and the Monkey King

1. Sam Youngman: Mitch McConnell’s campaign manager resigns after Iowa bribery scandal deepens “Jesse Benton, the campaign manager for U.S. Senate Minority Leader Mitch McConnell, will resign his post as a bribery scandal from the 2012 presidential campaign threatens to envelop Benton and become a major distraction for McConnell’s campaign…”

2. Stanley Kurtz: How the College Board Politicized U.S. History | John Holbo: American Exceptionalism–A Double-Edged Word: “I’m not surprised some conservatives are upset about the AP American History test. But I am bemused by the strength of the axiom Stanley Kurtz would oblige us to adopt, to keep things from getting politicized: ‘America is freer and more democratic than any other nation’…. This is a comparative thesis about the international order, so it is noteworthy that Kurtz simultaneously forbids the ‘internationalization’ of US history. Comparative ‘transnational narratives’, the only sort of thing that could empirically support the validity of Kurtz’ exceptionalist axiom, are out! But I suppose Kurtz is just trying to avoid confusion. (It is wrong to allow that there could be empirical disconfirmation of any aspect of a result that has been transcendentally deduced from an impulse to amour-propre.)…. What we obviously want is: 3) It makes sense to single out for special study features that make (or seem to make) the US an outlier, among nations, relatively speaking. Culturally, politically, geographically, in terms of not having its industrial base shattered after W.W. II, on and on and on. Studying 3), in a serious way, is incompatible with catechizing students… while depriving them of any comparative basis for judgment…. [This] is only good for doing the one thing Kurtz says he doesn’t want to do: ‘ensure that students think a certain way about contemporary events’…. Kurtz is just kicking up partisan dust, obviously…. While penning the present post, I find this post at Powerline (wow, haven’t visited in years!)…. As G. K. Chesterton remarks: ‘”My country, right or wrong”, is a thing that no patriot would think of saying except in a desperate case. It is like saying, “My mother, drunk or sober”.'” | John Quiggin: “Interestingly, while insistent that the USA is more democratic than any other country, the National Review is also partial to the line that the USA is a republic, not a democracy, which is important when justifying restrictions on the right to vote. As with ‘people’s democratic republics’, the ‘republic’ bit is needed to ensure that a truly democratic government represents the genuine Will of the American People, rather than the transient preference of a mere majority (who might, for example, be Democrats)…”

3. Chico Harlan: America’s coal heartland is in economic freefall–but only the most desperate are fleeing: “For 51 years he’d lived in the same hollow and for two decades he’d performed the same job, mining coal from the underground seams of southern West Virginia. Then, on June 30, Michael Estep was jobless…. What has come since… a job-hunt in a region whose sustaining industry is in an unprecedented freefall…. Miners, modestly educated but accustomed to high pay, are among the hardest group of American workers to retrain. They also tend to challenge one of the tenets of economics logic–that people will go elsewhere to find jobs…. ‘This is where you grew up; you can fish, you can hunt. Land is cheap. Chances are your grandfather owned that property’, said Ted Boettner, executive director of the West Virginia Center on Budget and Policy. ‘So leaving that to go somewhere else where you’ll be stuck in Toledo doesn’t sound very attractive’…. Estep often talks about… the cave-ins he escaped, the safety regulations his bosses never heeded, the neck and back injuries he sustained and never officially claimed, for fear of losing his nonunionized job…”