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Okun's Law and our kleptocracy

Terrific post from attempter:

The way things are today, anyone who wants to reform anything, anywhere (or in the case of politicians, pretend to try to reform) finds himself blocked by some vested interest which pops up to resist. There’s always a particular criminal who, in defending his own piece of the action, also takes the lead in defending the corporatist system as a whole, in that particular fight. The resources of change are always more thinly and broadly distributed than the force of the status quo, which concentrates immediately in the form of that special interest. That’s the way kleptocracy works. That’s also part of the reason regulation of rackets can never work. ....

So we have the vector of reform blocked and shattering itself on the immovable object of the entrenched racket. And in the same way we have the vector of that same racket’s insatiable greed and aggression as an irresistible force pushing the inertial government and power structure as a whole. As physics equations, these are identical effects, although in one case the racket is stationary, in the other it is in motion. In both cases its inertia is immutable.

The vector of racket greed, what Marx called the siren song luring the racketeer, cooing “Go on!…Go on!”, is always in the direction of greater expansion, greater complexity, monopolizing more of the finite system resources for itself. The system as a whole cannot achieve sufficient concentration at any point to resist this aggressive concentration.

The chronicles of, to put it generously, futility from the access bloggers are a necessary part of this process, since they normalize the complexity. The "health insurance exchanges" are a perfect example of this, reifying racketeering as they will, in the form of drop-down "choices" and "plans", all on a very expensively designed website.

It follows from this that there’s no way the system can rationalize itself or retrench in its own self-interest. Trying to do this, it would run into the same special interest resistance at each point. It too would find itself more dispersed than the concentration which resists. Nor can it even keep up its sham pretenses to democracy, two conflicting parties, the rule of law, since there’s no way for it to distribute responsibility for anyone in particular sustaining a loss. Nor is there anyone who would be rewarded for imposing this loss on anyone within the fraternity. Each racket or individual racketeer says, “Why should I take the hit for the common (elite) good? Let someone else take it.”

The recent doubling down on the ethanol mandates is a good example. The ethanol racket is absurd even by this kleptocracy’s standards. Many other rackets opposed this blend wall extension. All rational observers think the mandate should be repealed completely. It will only exhaust the people even further (exhaust their economic capacity and perhaps their political patience; everything runs that risk) and render the infrastructure even more prone to breakdown. But the system is helpless. At each point, like this one, there’s one aggressor against a dissipated front. It’s the same as when the people try to fight them.

This is a welter of parasites battening on the same host. They’re in a zero sum game, not only against the people, but among themselves. Each has an interest in just exploiting the host, not killing it. But together they are killing it and therefore themselves. It’s clear none is capable of organizing or regulating the others. The federal government isn’t capable of doing it. If one big bank tried to do it, it would be subverted by the others. Each racket, from highest to lowest, is going to maximize its bloodsucking until there’s no blood left.

It’s the truest and most extreme example of the tragedy of the commons. (The “tragedy of the commons” is a Big Lie in general, but in cases like this one it’s true.) Biologically, it can’t stay this way. It’s impossible to exploit any resource this way forever or to maintain such cannibalistic complexity. Such a bottleneck cannot endure. That’s why no such tyranny has lasted long, and in the acceleration of modern times, where tyrannies take only years to go through the same life cycle which once took centuries, we can reasonably aspire to soon see the collapse of this one.

Okun's Law: "If something cannot go on forever, it will stop."

NOTE Via, of course, Naked Capitalism. And Shystee absolutely called his shot on this one, back in during the collapse of Lehman: It's a "bust out," just as in The Sopranos.

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beowulf's picture
Submitted by beowulf on

Stein was the formulator of "Herbert Stein's Law," which he expressed as "If something cannot go on forever, it will stop..."

Okun's law is an empirically observed relationship relating unemployment to losses in a country's production. The "gap version" states that for every 1% increase in the unemployment rate, a country's GDP will be an additional roughly 2% lower than its potential GDP.

Both were good guys, yes even Ben Stein's dad. As Nixon's CEA chairman, Herb Stein persuaded President Nixon to go full-on Keynesian and endorse a "full employment budget".

Submitted by lambert on

Perhaps I should have translated it into Chinese....

letsgetitdone's picture
Submitted by letsgetitdone on

beowulf, and thanks also for reminding us how much further to the right Obama is than Nixon.

beowulf's picture
Submitted by beowulf on

Not only was Nixon's 1974 healthcare plan more progressive than Obamcare (it was based on a 75% employer mandate, the employee's 25% share would average, in 2010 dollars, $650 a year), the1947 healthcare bill cosponsored as a freshman congressman was similar in its use of income-scaled premium subsidies. However, the 1947 bill's subsidies were limited to nonprofit insurers (I doubt for-profit insurers even existed at the time) and there was no individual mandate.

A pity the guy never had a supermajority in either House as President (or a majority for that matter). Nixon's secret was striving for liberal goals by using the most conservative rhetoric possible. Besides his creation of the EPA, ending the govt policy of assimilating away Native American tribes, submitting full employment budgets, expanding Social Security benefits, enacting affirmative action to desegregate the workplace and taking the US off the gold standard; President Nixon's FAP "negative income tax" was the most progressive piece of economic legislation since perhaps the original Social Security Act, maybe even more so.

It was killed in Congress by an odd coalition of Northern liberals (who were dissatisfied that it paid out less than NE state welfare systems, though Nixon's bill allowed states to top off benefits) and Southern conservatives. Now why they were opposed is damn interesting, they feared that Nixon's Family Assistance Plan would revolutionize the racial social structure in South. And they were probably right. Nixon's plan would have immediately tripled the average income of the poor in Southern states.

Chomsky is right that Nixon was our last liberal president (in the context of noting that his "war on drugs" devoted two-thirds of its funding to drug treatment), and even at the time some people realized that. Don't get me started on Russ Baker's thesis: That the same constellation of corporate, military and intelligence elements which removed JFK from power orchestrated the events that forced Richard Nixon to resign.