Post WW2 International Economic Competitive Adjustment and the New Normal
Short Term Politics Versus Long-Term Returns  Video from Prof. Mark Blyth PhD -
Crashed Video and book-review of Crashed: How a Decade of Financial Crises Changed the World by  edited by Walter Antoniotti
Return to Political Economy Book Summaries  Updated 8/7/18        Please link to, use to educate and share. 

Executive Summary
Post Great Depression
Made Low Unemployment "the' Public Policy Goal.
 Post WW2 Pent-up Demand
increased AD, increasing US wages and Profits.
The Resulting High Inflation pushed interest rates up followed by a 30-year decline.
Profit Margins Stayed High as Western business used continuously falling interest rates for highly leveraged refinancing creating higher profit.
Western Business Adjusted to a mounting profit squeeze caused by increased flat world AS. "Wages fought profit and Profit Won."
Only U.S. Increasing Demand was available to soak up global savings surplus to negate AS > AD. This will continue.
Resulting Political Turmoil
will also continue but its effects will be less volatile.
Fiscal Policy AD Increases in the form of Infrastructure spending and or helicopter money drops like tax reductions.
Guaranteed Government Debts
may allow 2% real 1950's economic growth.
U.S. Post WW 2 Adjustments Part 1     Part 2

1. Cold War to 1980 AD > AS

2. Neo Liberal Reset 1980- 2008 AS > AD 3) Reactions to Neo Liberalism
Full Employment Goal = Inflation, Debtors Paradise

Business Responded to Inflation Led to
Deflation and a Creditors Paradise

1) Sustained Deflation has 
Winners and Losers

2) Globalization Failed 3) Pickett's R > G
and Back to Equilibrium
Structural Causes Structural Causes Winners Losers    Winners and Losers Historical Long Run?
Return on Capital Growth R > Growth rate of the Economy G. 90% of Income Gains Went to Top 1% and since 2012, most of this (70% of that 90%) went to Top 1/10 of 1%. Credit to consumers, business and governments  expanded to equate AD with AS.
Strong Unions
Restricted, Rigid Labor Markets
Central Government Strong
Central Bank Weak
Finance Weak
Weak Unions
Open Flexible Globalized Labor Markets
Government Less Economic Responsibility
Central Bank More Economic Responsibility
Finance Strong
Debtors: Can't or Wont Pay as Deflation Kills Wage Growth and Increases Real Debt Value Creditors lost as
Real Value Up
But Some Don't Pay
World's Very Poor and
Very, Very Rich Win

Vast Middle of Rich Western Nations are Stagnate
Economic Results
Sustained Inflation
Wages Share All Time High
Corporate Profits All Time Low
Inequality Low
Economic Results
Secular Deflation
Wages Share All Time Low
Corporate Profits All Time High
Inequality High
Populist Nationalist Parties attracted voters with renationalization and anti-austerity policies


Center Left Parties in control lost as lower wages and fighting more over less cartel politics blamed capitalism and globalism

Center right parties in control blamed immigrants and globalism


Liberalism Under Siege 51 min vide



Part 4 Neo Liberal Economics failed to forecast
 US/Europe Financialization Collapse

I. Free Market Neoliberal Economic Orthodoxies wrong,
   A. Finance does affect real economy.
   B. Finance system can falter.
   C. Many economist wrong because of politics.

II. Real Economy of trade imbalances did not the root cause the 2007-2008 FINANCIAL CRASH
A. The earlier Dotcom Bubble Crash did not cause a banking crises because investors took the loss.
    B. World trade imbalances, the Balance of Financial Terror were not the root cause the crash
         1. U.S. negative trade balance, as many predicted, did not cause assets and the dollar to crash.
             a. As of 6/18 both have appreciated.
             b. See The New Financial Geopolitics: Post-Cold War Geopolitics in a World of ‘Long and Low.’ 96 min video
         2. Loans to Greece from Germany's trade surpluses were not the problem as France and the Benelux nations
             are the big players in the Transatlantic dollar flows needed for international trade and Exorbitant Dollar Privilege.1
             a. France runs a small trade balance.
             b. South Korea currency tanked even though she had a positive trade balance and ample dollar reserves..
    C. South Korea and the WEST could not get dollars needed to fund the substantial daily borrowing needed
         for international commerce.
 II. Almost all banks were very highly leveraged with substantial short term $ borrowing and Euro collateral needed for daily operations.
     A. When Lemans $180 billion over-nigh funding needs were not met by the Funding Market, the entire market  crashed.
          1. Worldwide credit flows stopped and in a few days ATM machines would be empty.
          2. Bad housing loans were not the problem, rolling over short term daily funding dollar needs
              with poor mortgage debt collateral immediately would quickly crash the system.
     B. Credit stopped
          1. Europe's banks had become the world's hedge fund for world dollar flows which were
              based on highly leveraged borrowed dollars and Euro denominated collateral.
              a.  Thatcher deregulation of London's financial system made it the hub of dollar
                   denominated European bank debt. into and out of the U.S.
              b. The U.S. eventually followed with financing needed for Clinton's Community Reinvestment Act
                   which loosened housing mortgage rules needed to expand minority housing
                  1) Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation
                  2) Commodity Futures Modernization Act, which exempted credit-default swaps from regulation.
          2. Few had dollar reserves to meet the daily needs of the banking and corporate world.
          3. The Walls Street model of an extremely leverage wholesale funding model running out of NY and London would crash.
     C. The FED decided to protect large U.S. money fund investments in Europe's banks.
          1. Doing so on a world stage was an unprecedented move by
              providing unlimited dollar reserves liquidity to anywhere to almost anyone.
          2. FED did not want a "fire sale" of U.S. mortgages held by European banks
              a. U.S. government wanted to use tax payer dollars to finance the bailout.
              b. Uncontrollable private financing was not to be allowed.
          3. Half the liquidity, about $2.5 trillion, using fixed exchange rate currency swaps
              with Europe Central Banks was then loaned to European illiquid banks.
              a. Interestingly, Russia little FED help with her 2007 financial problems.
              b. Eastern Europe was helped because they were finances by Western Europe banks.
              c. FED was messing in the world of geopolitics.

III. Was Federal Reserve involvement in a geopolitical world appropriate?
    A. No, if the crisis was a sovereign debt crisis' as the Euro Central Bank was the appropriate agency.
    B. No, if as the
Max Plank Institute believes, it was because of dysfunctional Euro participants.
    C. Yes if it was a failure in the Transatlantic Dollar Flows as described by Mark Blyth.

IV. Stability requires dollar supremacy
     A. World trade is stable because the world, through Europe's banks, completes the circular flow of dollars back
          to the US by investing in U.S. companies.
     B. Dollar investments dependent on high Intellectual Property generated corporate profits and U.S. economic growth.
          1. Substantial portion is in monopoly power companies Apple, Google, Facebook, Pfizer and Johnson/Johnson.
          2. These profits are politically dependent on intellectual property rights which are dependent on trade treaties,
     D. Distribution of these profits has resulted into an increase inequality of income.
     E. The disruption of this process, called the Trump astric, has many academics apprehensive
     F. Source
The New Financial Geopolitics ─ Europe: Helper, Spoiler, Risk Generator? 86 min video

Part 5   Understanding Right and Left Populism
Summarized Below By Samir Gandesha, an Associate Professor in the Department of the Humanities
and the Director of the Institute for the Humanities at Simon Fraser University. posted on  by 


1. Growth of Populism

Right-wing populist parties throughout Europe in Austria, Hungary, and Poland 
Also in Erdogan's Turkey 2003, Modi's India 2014,  Trump's American 2016, Batten's United Kingdom 2016.

Left-wing populism
The Arab Spring in 2011 Tahrir Square [Egypt] 2011 was short lived,
Zuccotti Park [NYNY] 2011
, was felt five years later in the rising support for Bernie Sanders and Jeremy Corbyn.

Latin America Bolivarian, Venezuela Bolivia and Argentina.

Focus on two populism accounts
to understand the difference between right and left forms of populism in the context of neo-liberal globalization.

Empirical study by Norris and
Inglehart (2016) emphasized
1) anti-establishment 2) authoritarian
3) nativism

Theoretical account by Ernesto Laclau (decades) saw an  “equivalential chain” of different demands
democratic, horizontal and egalitarian discourse.

2. Populism Explained: Economic Insecurity or Cultural Backlash?

Three distinct elements
1) anti-establishmentism  
1) representative democracy;
2) authoritarianism           
2) liberalism  
3) nativism
                        vs. 3)osmopolitanism.

Two distinct axes: economic and cultural.
1)evel of state economic management
2) conservative” vs. “progressive” values.

Three approaches

1) the rules of the game
2) the “supply-side” party politics
3) the “demand-side” of party politics.

Two causes.
1) response to economic insecurity
2) backlash by older white males

Norris and Inglehart argue that the latter is the most convincing argument: “We believe that these are the groups most likely to feel that they have become strangers from the predominant values in their own country, left behind by progressive tides of cultural change which they do not share… The silent revolution of the 1970s appears to have spawned an angry and resentful counter-revolutionary backlash today.”

One wonders whether the authors don’t seriously underestimate the threat right-wing populism poses to the institutions of liberal-democracy in the United States. A worrying inference that the authors explicitly draw from their progressivist premises is that populism will eventually die out. The study therefore fails to sufficiently appreciate the ways in which populist governments seek to institutionalize their agendas, thereby changing the rules of the game. This has become most drastically evident in the case of Poland, for example, in which Andrzej Duda (leader of the right-populist Law and Justice party) has significantly limited the autonomy of the judicial branch of government.  Other such examples abound.

3. Neoliberal globalization is comprised of four processes:

1) accumulation by dispossession   2) de-regulation
3) privatization   4) upward re-distribution of wealth

Together they have increased economic insecurity and cultural anxiety by
1) the creation of surplus peoples   2) rising global inequality
3)  threats to identity.

Anxiety from neoliberal globalization has ammunition right and left populists.

Neither Norris and Inglehart nor Laclau adequately account for such insecurity in their theorization of populism.

“the people” are differentially deployed by right and left and they themselves must be understood in terms of the respective enemies through which “the people” is constructed. And this is the decisive dimension of populism.

Right populism defines "the people" as those confronting an external enemy.
1) Islamic terrorism  2) refugees   3) the European Commission,
4) International Jewish conspiracy ...
Left populism defines “the people” as social structures/institutions
1) state and capital that thwart its aspirations for self-determination
2) allows hospitality towards the other

Right populism defines the enemy in personalized terms
insecurity and anxiety are
necessary, unavoidable, even a favorable product of capitalist social relations.
generates acceptable fear of the stranger and a punitive state
Left populism defines the enemy in terms of socio-economic structures
insecurity and anxiety are
caused by a
dismantling of the welfare state and workforce casualisation.
These egalitarian solutions that can also turn authoritarian.

Summary of Summary
Neoliberal globalization has increased both
 economic insecurity and cultural anxiety.

Have theories of populism
taken adequate account of such insecurity?

Such accounting is key to understanding the difference
between right and left forms of populism

 Nazism And Neoliberal Mythmaking
 German Reconstruction As State-Phobia      The State As Killer    Europe and the Centre-Left Fall under Hayek’s Spell     A Map of Hayek's Delusion



Part 6 Populism is the Reset

Populism is not an economic distribution complaint, it is driven by 3 decades of market driven globalization.
It is not just about wage stagnation and loss of jobs, it is about disempowerment, social exclusion, unfairness, and humiliation.
Many Trump Populists seek recognition, having a meaning say in shaping the forces that govern their collective lives.

from Michael Sandel: Populism, Trump, and the Future of Democracy

Important Question, is Kantian Morality enough for the Public Sector enough, especially since some think it is too much!
Should public discussion go beyond safe and delimiting morality and moral duty, beyond the legality of rights and human dignity.
Should respect for work and be part of the discourse?
Should competing conceptions of the "good life" be on the table of public discussion?


Editor's Note: Michael wants more that Kant. Kant is enough.
Michael Aandel is a lot of Charles Murray who is basically correct,
but wants too much control of what constitutes correct morals and ethics.


Part 7 Predictions

1. Working Properly, our mixed economy will react and create a more equitable Income Distribution.

2. If Not, Deep Do Do

3. Historically low interest rates will continue.

4. Governments spent $15 trillion buying bad loans.
This time of sovereign, business and consumer debt and or equities could crash.

 if necessary, they will print money again

5. Capitalism will survive as being "fragile", it gains from external shocks.