Doug Henwood: His Taste in Music is a Little Doctrinaire, but His Economics is Outta Sight

16 Jul

Doug HenwoodThose of you following this discussion between me, Matt Yglesias, and Mike Konczal, need to check out this post from Doug Henwood. It not only cuts through a lot of the fat, but it also takes us in a completely different, unexpected, and difficult direction, raising fascinating questions about the petit bourgeois origins and dimensions of the politics of inflation.  Doug is my rabbi in all things economic (though, sadly, we part ways on matters musical).  Check it out, comment there, here, everywhere.

To my astonishment, this debate, or a spin-off of this debate, seems to have been kicked upstairs.  Way upstairs.  As in Paul Krugman and Brad DeLong upstairs.

Update (July 18, 12:30 pm)

And now the boys—and, seriously, there are an awful lot of boys in this debate; never realized just how male-dominated these types of discussion are—over at Crooked Timber are getting in on this.  Fascinating discussion over there; check it out.

Update (3:30 pm)

And more debate over here at Lawyers, Guns, and Money.

Update (4:15 pm)

And here from Will Wilkinson, who seems to think he’s schooling us all with his considered notion that nothing lasts forever and things change, and here from Kevin Drum.  And Yglesias has yet another post.

8 Responses to “Doug Henwood: His Taste in Music is a Little Doctrinaire, but His Economics is Outta Sight”

  1. Doug Henwood July 17, 2011 at 12:40 pm #

    Thanks Corey. It would be, of course, churlish for me to dissent from your judgment of my musical tastes, so I won’t.

    • Corey Robin July 17, 2011 at 10:43 pm #

      How about “stringent”? Would you prefer that?

  2. Jon July 19, 2011 at 4:54 pm #

    Reading Yglesias’ post on “The Fate of the Safety Net”, I noticed this remark:

    “Poor Americans could enjoy substantially higher living standards if we did more to enact transfer payments that ensure that the fruits of economic growth will be broadly shared.”

    This statement is harmless by itself, but I began to consider it in the context of his remarks on economic recovery. His advocacy of monetary policy over fiscal policy guarantees almost no change in the underlying economic and political trends of our society (aside that it might not work), As you mentioned, fiscal policy has both economic and political benefits. The clear distinction of democratic participation between fiscal policy and monetary policy (which, by definition, is supposed to be apolitical) is an important psychological factor that could lead workers to begin to contemplate their power to influence things.

    That said, when Yglesias suggests increasing government transfer payments (and in the same post questions their “political sustainability”) as a direct way to reduce inequality, I wonder why he doesn’t approach the problem directly by focusing on the causes of inequality rather than its effects. Stronger labor laws (or just enforcing the ones currently on the books), reigning in our predatory financial, health, telecommunication, and energy systems, shifting our economy from speculation to production, and engaging in smart trade policies that don’t send our jobs overseas, or financial regulation to prevent inequality-exploding crises from occurring, are basic starting points that would tackle the problem at its roots rather than mask the underlying rut. A sound economy should not produce extreme levels of inequality, and transfer payments become a tool to be applied at the margins, not central policy. However, suggesting transfer payments as a central pillar of any policy to “substantially” reduce inequality seems like an end-run, and does not question the system that produces such disastrous conditions–and of course, would do little, if anything, to change it. And it probably won’t work (given ease of access to tax havens). Keeping within existing ideological bounds seems likely a key factor of consideration for Yglesias when he offers up a policy prescription.

    I am also suspicious of the term “transfer-payments”. It implies the generators and users of these payments are to some degree separate entities. But as Hobbes would say, you cannot break a contract with yourself, so how can you transfer money from yourself to yourself? It doesn’t make any sense and I suspect it is a subtle way of making it a class issue, custom-tailored for our political climate obsessed with “class warfare”.

    • Corey Robin July 19, 2011 at 9:32 pm #

      Some excellent points, Jon. I suppose he would say he supports all those policies you cite, though I think you’re right to focus on his emphasis. And I like your last point. Nice to see you here.

  3. Jon July 19, 2011 at 11:44 pm #

    I am not sure he necessarily would support those steps, or even believes they may be particularly effective.

    In a post titled “Inequality on the rise in OCED”, he wrote the most “natural” way to respond to rising inequality would be to increase transfer payments to the poor. He went on to list four additional “major inequality-reducing steps”, such as “increase the share of people graduating from college, opening the borders to more high-skilled immigration, harmonizing professional licensing standards internationally, etc.” (College graduates as a share of population has been rising above trend for two decades, and I suppose more competition for doctors or lawyers would make the poor feel less unequal, but that’s beside the point.)

    These are small ideas of questionable impact at a time of near record-level inequality that Yglesias touts as “major steps” to alleviate the mass suffering. Labor laws, consumer protection, among other things, don’t make the cut, presumably because they would be less effective (or counter-active) policies. Adopting four or five of these “major steps” surely leaves little room for much improvement. So either Yglesias overstated the effectiveness of these policies or he believes inequality can be reduced only to a certain extent before it becomes impossible or counterproductive (or perhaps immoral), and judging from the litany of suggestions, that bar seems pretty low. I suspect Yglesias believes, like many neoclassical economists, there is an optimal, ‘healthy’ level of inequality which serves some important functions such as to minimize risk of wage inflation, boost corporate profits, reduce democratic participation, and keep the public nervous and easily controlled. Of course, inequality, also, is a by-product of neo-liberal trade policies that more or less should be accepted as a necessary consequence of ‘reform’. Someone who openly and proudly identifies himself as an ideologue would do well to adhere to the boundaries.

    Furthermore, Yglesias has written on numerous occasions he just isn’t much bothered by current levels of inequality. In a post, “Beyond the Top One Percent”, he expressed he is “disillusioned” by those who point out the increasing economic and political marginalization of 90% of the population, because the rich, like CEOs earning $10 million a year have busy schedules and thus, hard lives. Only when one considers the diminishing marginal utility of money or overall stability of the system does inequality become a concern and the most “natural” way to address it is to put more people on welfare.

    And when that occurs, we should be grateful because economic growth is being “shared” with us, not that we are entitled to it.

    • Corey Robin July 20, 2011 at 7:20 am #

      Jon, Can you post the link to that “Beyond the Top One Percent.” On further reflection, I do think you have a point. Yglesias does support the policies I said he supports — he’s written on them — but you’re right that he emphasizes other policies, particularly in the context of inequality, suggesting that his support for labor, etc., is part of a different package of concerns, which may or may not be that central to his overall worldview. Anyway if you could post that, that would be great.

      • Jon July 20, 2011 at 3:24 pm #

        Sure: http://thinkprogress.org/yglesias/2011/06/20/248739/beyond-the-top-one-percent/ .

        I am not sure how much his views have changed, but here is an interesting post I found where Yglesias wonders why anyone cares of the reasons inequality is so high: http://www.theatlantic.com/politics/archive/2007/10/who-cares-why/46730/

        His concern is that an investigation into the origins of inequality might lead to policy ideas that address the underlying causes rather than paper over them, and “the cure — policy interventions into the operation of the market — would be worse than the disease “. Leaving aside moral implications, I wonder what market Yglesias refers to (surely not the beloved free one)? it’s a market that works fabulously well for a few, to the detriment of the vast majority of the population–and must be protected from intrusive policies that may obstruct the natural order of things. Which brings me to my point. One way to reduce inequality is to simply enforce existing law. Prosecute accounting control fraud, break up trusts, go after predatory lenders and contract arbitragers, clamp down on labor abuses and discrimination, use regulatory powers the SEC, CTFC, OCC, et al. already have to reign in speculation, fraud and other abuses, hold all people responsible for crimes they commit–not just poor people. Enforcing the law equally and fairly to all Americans is a simple idea that can be accomplished right now without getting anything through Congress which will produce significant results.

        However, that assumes the law actually applies to the super-rich. As far as I can tell, it doesn’t, and suggesting that CEOs who flagrantly break the law (Dean Foods, the CEO Yglesias of which cited in his post, dodges taxes and violates environmental laws on tens of thousands of occasions) should be prosecuted for their crimes is heresy. According to Yglesias, they are just going about their preferred way of living, plundering and looting the earth and the rest of the population, but that’s OK, because they work tirelessly to do so. This smacks of entitlement. The rich are free to do as they like because they own the country. This may produce soaring rates of inequality, but that’s OK, and if things get too out of hand, we should increase “transfer-payments” to satisfy the rubes, but it is imperative not to alter the system–err, marketplace. I imagine it’s also important to stress transfer-payments is not a way to correct moral or political imbalances, but rather to take advantage of the diminishing marginal utility of money or some other technical goal.

      • Jon July 20, 2011 at 11:20 pm #

        I want to emphasize my point that in “Beyond the Top One Percent” Yglesias believes “there’s a strong case for redistributing funds from people who have a lot of it to people who’ll get more use from it.”.

        The emphasis is not that people (ie – 90% of the population with a medium income of $31,000 per household) are in any way, shape, or form, entitled to the funds generated, but that they may get more “use” from it. It is purely a technical consideration, not a moral or political one.

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