As reported in the press (right now kicking around the 7.2 percent official unemployment rate), 2008 was a particularly bad year for American workers. Nonetheless, one can say that it is just one more bad year in a lengthening string of bad years.
The year 1973 is often seen as a turning point for the U.S. economy. Between that year, and 2006 (the last year to end before the current recession), per capita GDP went up from $6,521 in 1973 (about $29,600 after adjustment for inflation) to $44,073, a roughly 49 percent increase. What most people actually earned, however, seems to tell quite a different story.
Mean Income
When current dollar figures are adjusted using the Consumer Price Index (CPI), mean income rose ten percent for males, 64 percent for females in the 1973-2006 period.1 When considered as a proportion of per capita GDP, however, male mean income fell from 142 percent of per capita GDP to just 106 percent of it. For females, income went from 58 percent of per capita GDP to just 64 percent of it.
Median Income
A measure of the mean, however, has its limitations when covering such a wide range of figures as a survey of incomes produces, making the figures on median income well worth examining. As it turns out, this has not merely stagnated, but dropped. As of 2006, the median male income ($32,265 in current dollars) was actually 12 percent less than it was in 1973 ($36,578 in 2006 dollars, after adjustment using the Consumer Price Index, which suggests a higher inflation rate than that used in the Census's data sets).
Median female income did increase, by about 60 percent in real terms (to about $20,000 a year). However, when reconsidered relative to per capita GDP, median male income went from 124 percent of per capita GDP to 73 percent of it during those thirty-three years; while for women the increase was a mere 3 percent, from 42 percent of per capita GDP in 1973 to 45 percent of it in 2006.
The picture becomes particularly interesting when the total figures are broken down by the level of educational attainment. The available data does not indicate what happened during the 1970s and 1980s, but it does show what happened in the 1990s and 2000s. Males 25 years and over who have less than a bachelor's degree saw their median income stagnate in real terms after 1990. Those with some college and no degree, or an associate's degree, actually saw their income fall slightly by the end of the period.
Those who have attained four year degrees earned just 6 percent more in 2006 than they did in 1991-their median income falling from 167 percent of per capita GDP, to 139 percent in that same time frame.
By the same measure, women with college degrees also saw their income fall relative to per capita GDP, though to a more limited extent, from 64 percent to 60 percent of it.
The Minimum Wage
Not surprisingly, the lack of increase has been felt especially sharply at the bottom of the pay scale. In 1968, the minimum wage was $1.60. While it kept up with inflation through the 1970s, it was allowed to slip in the three decades since. Simply to recover the purchasing power it had forty years ago, it would need to be revised up to $10 today. To reflect the per capita GDP increase between 1968 and 2008, it would need to be in the range of $16. That is close to three times its present level, and more than twice what it will be when the recent increase takes effect in mid-2009.
Putting It All Together
In short, what the figures show is that the growth of income has not kept up with the reported growth of GDP (which is to say, it has fallen in relative terms). In fact, not only has it grown much more slowly in real terms, but for many-those earning minimum wage, or near to it; men closer to the lower than the higher end of the labor market in general-income actually fell. Women appear to have done better, but they still earn substantially less than men by just about every measure.
Readers should keep in mind that CPI is often thought to understate inflation, rather than overstate it, in which case the picture presented above may be optimistic. (That is especially the case with large expenses like housing, education, and health care, the prices of all of which have been going up faster than inflation; and it is worth noting that it does not account for the spikes in the prices of food and energy.)
Additionally, annual money income does not tell the whole story. The picture also includes longer working hours-20 percent more than in 1970, according to Fareed Zakaria (who actually has the gall to celebrate the fact)-which suggests that the gains have been more limited, the losses more severe than they appear at first glance.
And of course, when they lose their jobs, Americans have to do without new ones for a longer time. The period of unemployment averaged about 10 weeks in the 1970s, but that figure has since risen to 16.9 weeks. (Keep in mind that it has long been the practice of the Bureau of Labor Statistics to regard anything more than 15 weeks as "long-term" unemployment.)
They are not unrelated factors: the scarcity of jobs (always much worse than the official unemployment figures) and the greater insecurity that goes with it has exerted a downward pressure on wages.
I could go on, talking about the credentialing crisis, and the lengthening commutes (and lack of decent public transport to help out with them), and all the rest of it, and the price that these things exact from the people who have to put up with them, but if you have read this far, I am sure you have heard the story before, many, many times. The only part you have yet to see is a happy ending. For all the hopes surrounding the new administration, I am very doubtful that we will actually see that.
1 All data on reported income comes from the U.S. Census Bureau.
Thursday, January 22, 2009
Monday, January 19, 2009
The Theory of the Leisure Class: An Economic Study of Institutions, by Thorstein Veblen
New York: Viking, 1931, pp. 404.
Thorstein Veblen's The Theory of the Leisure Class: An Economic Study of Institutions identifies the origin of a leisure class as such in its distinguishing itself from its "inferiors" in its living by prowess in exploit rather than diligence. That prowess, which was once demonstrated by the hunter's trophies, later came to be demonstrated by conspicuous leisure (e.g., exemption from materially productive, "industrial," labor). Increasingly, it also came to be indicated by conspicuous consumption signifying wealth (on the grounds that only those who are wealthy, implicitly by virtue of their prowess, can afford to sustain such "pecuniary damage"). As a result, waste is a mark of the "pecuniary reputability" which is the proof of standing and mastery in societies with sharp, elaborate status schemes.
Along with that mastery goes what Veblen terms a "pecuniary" (acquisitive, predatory) ethos, epitomized by the aristocratic sportsman-warrior, in contrast with the "industrial" (productive, work-oriented) one more relevant to the practical operation and guidance of economic life in the advanced societies of his own time (the Western world, circa 1900), and it may safely be said, ours.
In demonstrating the continued presence and significance of the acquisitive mentality, he examines its manifestations in a broad gamut of cultural institutions, including the world of work, religion, education, sports, the operation of charitable foundations, and the place of women in society (his discussion of which reminds one how much contemporary feminism shies away from turning an economic lens on the objects of its criticism).
There are points at which I felt Veblen overreached. Leisure in itself is a significant good, a point not recognized in Veblen's study. While Veblen acknowledges that the motives are not always easily separable from one another (the purest conspicuous consumption is that of goods which do not even offer aesthetic satisfaction or physical comfort), material and aesthetic pleasure, hygiene and other such goods probably count for more than he allows, even at the more extreme end of financial extravagance, where a great deal of expenditure buys vanishingly small increments of these things. And though he admits the limits of his economic, material focus, it still may be that he is excessively utilitarian in his assessments (for instance, in his criticism of higher education).
On the whole, however, Veblen's theory has considerable explanatory power, shedding light on a wide range of phenomena. Reading his book I found myself thinking of the eagerness of so many businessmen to identify themselves with warriors and the warrior ethic (as with those who look to Sun Tzu as a guide); of what exactly is meant when people say that participation in team sports is a character-builder; of the differences between America and Europe in their respective outlooks on matters like war, peace, capitalism, socialism, welfare and religion (the latter a point to which Veblen devotes a number of pages in a discussion that seems surprisingly contemporary); of the role of the balance between these two mentalities in the rise and fall of great economic powers over history, in the ascendancy and decline of the Netherlands, Britain and (many argue) the United States today. I thought of how much of the mentality he describes fits in neatly with what has been written about the authoritarian personality by thinkers like Theodor Adorno.
I also thought of the political trends which have swept the world since the 1970s, particularly the economic ones: the worship of wealth and the mystical exaltation of "the market" (assumed as a matter of faith to inscrutably deliver the natural and optimal result); the (over)financialization of the global economy (especially the massive expenditure of energy and wealth on the staging and fending off of hostile takeovers, much like premodern princes spending bloody and treasure on squabbles over fiefs) and the tendency to dismiss the actual production of goods and services as the central function of an economy among celebrants of those developments; the more broadly conservative mood of politics, which has not been unrelated to the heightened prestige of economic elites, from the British monarchy to Donald Trump. Considering it all, it does not seem to me an exaggeration to say that the last several decades saw the resurgence of the leisure class, not only as a political power, but the esteem in which its values are held in the culture at large.
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Thorstein Veblen's The Theory of the Leisure Class: An Economic Study of Institutions identifies the origin of a leisure class as such in its distinguishing itself from its "inferiors" in its living by prowess in exploit rather than diligence. That prowess, which was once demonstrated by the hunter's trophies, later came to be demonstrated by conspicuous leisure (e.g., exemption from materially productive, "industrial," labor). Increasingly, it also came to be indicated by conspicuous consumption signifying wealth (on the grounds that only those who are wealthy, implicitly by virtue of their prowess, can afford to sustain such "pecuniary damage"). As a result, waste is a mark of the "pecuniary reputability" which is the proof of standing and mastery in societies with sharp, elaborate status schemes.
Along with that mastery goes what Veblen terms a "pecuniary" (acquisitive, predatory) ethos, epitomized by the aristocratic sportsman-warrior, in contrast with the "industrial" (productive, work-oriented) one more relevant to the practical operation and guidance of economic life in the advanced societies of his own time (the Western world, circa 1900), and it may safely be said, ours.
In demonstrating the continued presence and significance of the acquisitive mentality, he examines its manifestations in a broad gamut of cultural institutions, including the world of work, religion, education, sports, the operation of charitable foundations, and the place of women in society (his discussion of which reminds one how much contemporary feminism shies away from turning an economic lens on the objects of its criticism).
There are points at which I felt Veblen overreached. Leisure in itself is a significant good, a point not recognized in Veblen's study. While Veblen acknowledges that the motives are not always easily separable from one another (the purest conspicuous consumption is that of goods which do not even offer aesthetic satisfaction or physical comfort), material and aesthetic pleasure, hygiene and other such goods probably count for more than he allows, even at the more extreme end of financial extravagance, where a great deal of expenditure buys vanishingly small increments of these things. And though he admits the limits of his economic, material focus, it still may be that he is excessively utilitarian in his assessments (for instance, in his criticism of higher education).
On the whole, however, Veblen's theory has considerable explanatory power, shedding light on a wide range of phenomena. Reading his book I found myself thinking of the eagerness of so many businessmen to identify themselves with warriors and the warrior ethic (as with those who look to Sun Tzu as a guide); of what exactly is meant when people say that participation in team sports is a character-builder; of the differences between America and Europe in their respective outlooks on matters like war, peace, capitalism, socialism, welfare and religion (the latter a point to which Veblen devotes a number of pages in a discussion that seems surprisingly contemporary); of the role of the balance between these two mentalities in the rise and fall of great economic powers over history, in the ascendancy and decline of the Netherlands, Britain and (many argue) the United States today. I thought of how much of the mentality he describes fits in neatly with what has been written about the authoritarian personality by thinkers like Theodor Adorno.
I also thought of the political trends which have swept the world since the 1970s, particularly the economic ones: the worship of wealth and the mystical exaltation of "the market" (assumed as a matter of faith to inscrutably deliver the natural and optimal result); the (over)financialization of the global economy (especially the massive expenditure of energy and wealth on the staging and fending off of hostile takeovers, much like premodern princes spending bloody and treasure on squabbles over fiefs) and the tendency to dismiss the actual production of goods and services as the central function of an economy among celebrants of those developments; the more broadly conservative mood of politics, which has not been unrelated to the heightened prestige of economic elites, from the British monarchy to Donald Trump. Considering it all, it does not seem to me an exaggeration to say that the last several decades saw the resurgence of the leisure class, not only as a political power, but the esteem in which its values are held in the culture at large.
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Monday, January 5, 2009
Public Transportation and Energy Efficiency
Reconsidering the issue of how the world might cope with the contraction of oil supplies in the next two decades, I found myself thinking about the issue of public transport. It is often said that a trip on mass transit uses only half as much oil as a trip by car, and equally often, we see such figures challenged.
One set of numbers that has attracted attention is the Department of Energy's calculation in the Transportation Energy Data Book (specifically, Table 2.12 of the Data Book's 27th edition) that countrywide buses may actually use more British Thermal Units than trucks when measured on a passenger-mile basis, 4200 BTUs per passenger-mile compared with a bit under 4,000 for trucks, and 3,500 for cars.
The Data Book's authors are careful to warn readers against simplistic comparisons between one mode and another, and it is right to do so. Given that many more of those car-miles than bus-miles are on the highway, where vehicles generally get better mileage, it would seem that the above comparison is slanted in favor of cars and trucks. The mile-counting also fails to capture the fact that bus trips are much less likely to be door to door than car trips, their passengers walking a stretch of the distance uncounted in the above analysis (though one has to wonder whether that fully compensates for the extra distances traveled on the more convoluted bus routes). And bus drivers do not circle around endlessly looking for parking spots the way car drivers do, adding unnecessarily to their total mileage.
It is also worth noting that the use of BTUs overlooks important differences in energy forms, overall energy use and oil use two different matters. Buses generally run on diesel, not gasoline, which is about a third more efficient, and studies which look at the difference in oil use (and in particular, the gasoline that would have been used in the absence of public transport, like ICF International's Public Transportation and Petroleum Savings in the U.S.: Reducing Dependence on Oil) tend to produce a more favorable picture of public transport's impact. And despite all its problems, the rail component of American public transport is still more efficient than private car use (while having the additional virtue of being able to operate on electricity), so that when mass transit is taken as a whole, it does not fare so poorly.
The fact that studies in other countries often post better numbers is not irrelevant. Low ridership in the U.S. is a factor in this study (the Data Book assumes 8.8 passengers on a bus, on average, make of that what you will), but this goes only so far in explaining the issue. The Public Transport Users Association of Victoria, Australia, cites Australian Greenhouse Office figures showing that even lightly loaded buses (carrying just 10 passengers, only slightly more than in the American case) are three times as energy-efficient as private cars. (Indeed, one has to wonder what a more detailed examination would produce, and in particular, how New York and Boston stack up against the Sun Belt sprawl of Atlanta, Dallas, Los Angeles or Miami-where visiting New Yorkers are more than willing to lecture locals on the comparative shabbiness of their city's service.)
Additionally, when the energy cost of manufacturing cars, as opposed to buses and trains, is counted in, the resulting figures strongly favor the latter. The same may go for the public infrastructure necessary to support them, one assessment positing that public transport consumes just 1/16th as much infrastructure. Given the energy costs of so much construction, and the fact that asphalt production is itself a major oil consumer, this too holds out the prospect of considerable potential savings through greater investment in this area.
In the end, the data would seem to validate the claims for public transport's greater energy efficiency, and especially its oil efficiency. And assuming that the much-discussed stimulus package actually materializes, doesn't get whittled down to nearly nothing, and ends up actually containing a substantial component of infrastructure spending (none of these things is certain, and the last has a tendency to be overhyped, as seems to have been the case in Japan's stimulus packages during the 1990s), then mass transit will be an especially worthy area for such spending.
One set of numbers that has attracted attention is the Department of Energy's calculation in the Transportation Energy Data Book (specifically, Table 2.12 of the Data Book's 27th edition) that countrywide buses may actually use more British Thermal Units than trucks when measured on a passenger-mile basis, 4200 BTUs per passenger-mile compared with a bit under 4,000 for trucks, and 3,500 for cars.
The Data Book's authors are careful to warn readers against simplistic comparisons between one mode and another, and it is right to do so. Given that many more of those car-miles than bus-miles are on the highway, where vehicles generally get better mileage, it would seem that the above comparison is slanted in favor of cars and trucks. The mile-counting also fails to capture the fact that bus trips are much less likely to be door to door than car trips, their passengers walking a stretch of the distance uncounted in the above analysis (though one has to wonder whether that fully compensates for the extra distances traveled on the more convoluted bus routes). And bus drivers do not circle around endlessly looking for parking spots the way car drivers do, adding unnecessarily to their total mileage.
It is also worth noting that the use of BTUs overlooks important differences in energy forms, overall energy use and oil use two different matters. Buses generally run on diesel, not gasoline, which is about a third more efficient, and studies which look at the difference in oil use (and in particular, the gasoline that would have been used in the absence of public transport, like ICF International's Public Transportation and Petroleum Savings in the U.S.: Reducing Dependence on Oil) tend to produce a more favorable picture of public transport's impact. And despite all its problems, the rail component of American public transport is still more efficient than private car use (while having the additional virtue of being able to operate on electricity), so that when mass transit is taken as a whole, it does not fare so poorly.
The fact that studies in other countries often post better numbers is not irrelevant. Low ridership in the U.S. is a factor in this study (the Data Book assumes 8.8 passengers on a bus, on average, make of that what you will), but this goes only so far in explaining the issue. The Public Transport Users Association of Victoria, Australia, cites Australian Greenhouse Office figures showing that even lightly loaded buses (carrying just 10 passengers, only slightly more than in the American case) are three times as energy-efficient as private cars. (Indeed, one has to wonder what a more detailed examination would produce, and in particular, how New York and Boston stack up against the Sun Belt sprawl of Atlanta, Dallas, Los Angeles or Miami-where visiting New Yorkers are more than willing to lecture locals on the comparative shabbiness of their city's service.)
Additionally, when the energy cost of manufacturing cars, as opposed to buses and trains, is counted in, the resulting figures strongly favor the latter. The same may go for the public infrastructure necessary to support them, one assessment positing that public transport consumes just 1/16th as much infrastructure. Given the energy costs of so much construction, and the fact that asphalt production is itself a major oil consumer, this too holds out the prospect of considerable potential savings through greater investment in this area.
In the end, the data would seem to validate the claims for public transport's greater energy efficiency, and especially its oil efficiency. And assuming that the much-discussed stimulus package actually materializes, doesn't get whittled down to nearly nothing, and ends up actually containing a substantial component of infrastructure spending (none of these things is certain, and the last has a tendency to be overhyped, as seems to have been the case in Japan's stimulus packages during the 1990s), then mass transit will be an especially worthy area for such spending.
Societal Slack in World War II and Today
By Nader Elhefnawy
After the September 11th attacks, it became very fashionable to draw parallels between the present moment and World War II on a number of levels, not least of them, the prospect of the country mobilizing (to some degree) in similar fashion. Of course, the comparisons have become less frequent, with the passing of the "Greatest Generation" mania of the 1990s; an increasingly skeptical attitude toward the conflicts fought under the larger heading of the War on Terror; and the appearance of much more rigorous economic analysis of the situation, like Joseph Stiglitz's recent The Three Trillion Dollar War.
Nonetheless, with those claims ringing in my ears, I penned an article which ran in Parameters in 2004 which attempted to look at the comparison with a little more rigor. (The piece, "National Mobilization: An Option in Future Conflicts?" can be found by clicking here.) Given my recent revisiting of the question of societal slack, it seemed fitting to revisit this particular discussion as well, the last really total" war involving the major industrial powers being a particularly useful test of the capacity for mobilization of this kind.1
One may as well start with the sheer scale of the war effort. The total defense outlays by the U.S. government for the 1941-1946 period comes to about $3.75 trillion in 2008 dollars, with the budget peaking at nearly a trillion dollars a year in 1944 and 1945.2 Daunting a figure as that still is by today's standards, it represents more than twice the country's whole gross domestic product in 1940, when the mobilization began.
This extraordinary effort was only conceivable because of three factors:
* The comparatively low preexisting levels of taxation, spending and debt.
* The political feasibility of progressive taxation.
* The rapid growth of the U.S. economy during (and after) the war.
The low preexisting levels of spending and debt allowed the U.S. government great scope in raising more revenue, by enlarging taxation and borrowing additional funds. In 1940, Federal revenue was equal to 6.8 percent of GDP, while Federal debt came to $52 billion ($790 billion in 2008 dollars) 52 percent of Gross Domestic Product.3 During the war, taxes tripled to over 20 percent of GDP by 1944-45. Debt quadrupled to $260 billion ($3.16 trillion in 2008 dollars) by 1946.4
Progressive taxation was indispensable to that enlargement of taxation. The share of individual income tax in Federal receipts tripled between 1940 and 1944, from 13.6 to 45 percent (and from roughly 1 to 9.4 percent of GDP), with the highest bracket set at 91 percent. Additionally, corporate income tax swelled to a record 39.8 percent of receipts in 1943 (and from roughly 1 percent to about 7 percent of GDP between 1940 and 1944-45).
And of course, economic expansion was the base on which everything else was built. In 1940, American GDP was $101 billion (roughly $1.58 trillion in 2008 dollars) according to the Bureau of Economic Analysis. By 1945, it was $219 billion (or $2.7 trillion), an over 70 percent increase. It was that growth which permitted the U.S. government to take in so much more revenue (equal to 45 percent of 1940 GDP in the last year of the war), and spend so much (the $82 billion defense bill of 1945 being equivalent to a trillion of today's dollars, and roughly 63 percent of 1940 GDP).5
It also enabled the Federal government to bear a vastly expanded debt, about four times as large as at the war's start. Relative to GDP it was twice as big in 1946 as 1940-but just 121 percent of it after the growth of the interceding years.6 With the readjustment of the U.S. economy in the following years, the economy was about as large in 1950 as it had been at the end of the war, but from 1950-1973 it continued to grow rapidly, averaging 4.2 percent a year in real terms. As a result, the level of Federal debt to domestic product actually fell all the way through the 1970s, from its 1946 level to 32 percent in 1981.
A proportionate level of effort today would mean ramping up annual defense spending up to the area of $9 trillion, and $35 trillion for the whole period, supported by the raising of Federal revenues to $7 trillion a year, and the amassing of perhaps $30 trillion in Federal debt, all by 2014. Assuming a reason to attempt such an effort was to appear, does it seem plausible that this would work out?
My conclusion then, which I still stand by, is that it is very doubtful. The U.S. is in most respects a fiscally more constrained country than it was in the years before and after World War II. While the total share of Federal receipts in GDP has dipped somewhat due to the tax cuts after 2001, it is still at 18 percent. Gross Federal debt, which held roughly steady from 1948 to 1981 in real terms (hovering around $2.3 trillion in today's dollars), has since quadrupled, expanding markedly faster than GDP so that it is now equal to 68 percent of Gross Domestic Product, and the continuing deficits may be much worse than they look.7 Progressive taxation on the scale of the World War II era also seems more doubtful, even under emergency circumstances, as Christopher Hood observed in a recent article, "The Tax State in the Information Age."8
Additionally, while future economic growth is hard to predict under such altered circumstances, there are reasons to think it would not be so dramatic. One is that the U.S. economy is far less manufacturing-intensive, and much more service-oriented, meaning slower productivity growth, and overall growth, for the foreseeable future. Meanwhile, it may be that modern industrial bases, geared toward far greater efficiency than the plants of the 1940s were capable of achieving, may secure that efficiency at the price of flexibility. In the event of an emergency requiring a dramatic redirection of industrial output, all of this may imply a frustrating shortage of capacity-and perhaps, an experience more reminiscent of Britain's during the war than the U.S.'s.9
In short, while the U.S. is a much wealthier and more productive society today than it was in the 1940s (with more than five times the GDP of 1945, roughly nine times what it had in 1940), it may have relatively less slack. Those who would resort to the analogy should keep that difference in mind.
1 Slack includes, but is broader than, "mobilizable wealth" as discussed by John Mearsheimer, among others, as slack also includes in-built resilience. For a discussion of mobilizable wealth in international politics, see John J. Mearsheimer, The Tragedy of Great Power Politics (New York: W.W. Norton, 2001), pp. 62-65.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 6.1, p. 109. Some might argue that the full cost of World War II did not end there, considering a range of expenses including the continuing occupations of Germany and Japan. However, the demobilization of U.S. forces was largely completed as of mid-1947, a year in which the defense budget was an eighth of its 1944-45 peak (when it ran nearly a trillion dollars a year, after adjustment for inflation). After that point, the immediate problems of the Cold War could be considered more relevant to defense planning.
3 Budget 2004, Table 1.3, pp. 25-26.
4 Budget 2004, Table 7.1, pp. 116-117.
5 In all, the defense bill came to a quarter of U.S. GDP for the years 1941-6.
6 The enlargement of the size of the government and its debt is even more dramatic if the war is seen as part of a larger crisis, beginning with the Great Depression of 1929. Total government spending went from 9.1 percent of GDP in 1929 to 14.7 percent in 1940, mostly as a result of the Federal government's share of GDP quadrupling from 1.6 percent in 1929 (prior to that time, state and local government were much larger) to 6.8 percent of it in 1940. Gross Federal debt also came close to quadrupling between 1929 and 1940 (from 16 to 52 percent of GDP, even after the economy, between 1936 and 1940, grew 20 percent above its 1929 level), before the war began. Combined with the quadrupling of the debt again in the war years, this resulted in the U.S. carrying fifteen times as much debt in 1946 as it had in 1929. (During the period as a whole, the economy expanded by a factor of two.)
7 Officially, the U.S. Federal deficit in 2006 was $248 billion, roughly two percent of GDP. However, when corporate-style accounting was brought to bear on the problem, the figure was in the area $1.3 trillion, closer to a staggering 9-10 percent. Dennis Cauchon, "Taxpayers on the Hook for $59 trillion," USA Today, May 28, 2007. Accessed at http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm. This is also without considering the likely overstatement of U.S. GDP as a result of inflated growth estimates, particularly during the last decade; and perhaps, other economic changes not adequately registered by GDP, like deindustrialization, the depreciation of infrastructure, and the enlargement of private debt. See Kevin Phillips, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (New York: Viking, 2008), pp. 85-88. According to the think tank Redefining Progress, which developed the Genuine Progress Indicator (GPI) as an alternative, U.S. per capita GPI has stayed roughly flat for the last three decades. See Dr. John Talberth, Clifford Cobb and Noah Slattery, The Genuine Progress Indicator 2006: A Tool for Sustainable Development (Oakland, CA: Redefining Progress, 2007). Accessed at http://www.rprogress.org/publications/2007/GPI%202006.pdf.
8 Christopher Hood, "The Tax State in the Information Age," in T.V. Paul, John A. Hall and G. John Ikenberry, eds., The Nation-State in Question (Princeton, N.J.: Princeton University, 2003), p. 217.
9 An interesting account of this can be found in Paul Kennedy, The Contradiction Between British Strategic Planning and Economic Requirements in the Era of the two World Wars (Washington D.C.: International Security Studies Program, Wilson Center, 1979). The essentials of his analysis can also be found in the latter chapters of his book The Rise and Fall of British Naval Mastery (London: Macmillan, 1983).
After the September 11th attacks, it became very fashionable to draw parallels between the present moment and World War II on a number of levels, not least of them, the prospect of the country mobilizing (to some degree) in similar fashion. Of course, the comparisons have become less frequent, with the passing of the "Greatest Generation" mania of the 1990s; an increasingly skeptical attitude toward the conflicts fought under the larger heading of the War on Terror; and the appearance of much more rigorous economic analysis of the situation, like Joseph Stiglitz's recent The Three Trillion Dollar War.
Nonetheless, with those claims ringing in my ears, I penned an article which ran in Parameters in 2004 which attempted to look at the comparison with a little more rigor. (The piece, "National Mobilization: An Option in Future Conflicts?" can be found by clicking here.) Given my recent revisiting of the question of societal slack, it seemed fitting to revisit this particular discussion as well, the last really total" war involving the major industrial powers being a particularly useful test of the capacity for mobilization of this kind.1
One may as well start with the sheer scale of the war effort. The total defense outlays by the U.S. government for the 1941-1946 period comes to about $3.75 trillion in 2008 dollars, with the budget peaking at nearly a trillion dollars a year in 1944 and 1945.2 Daunting a figure as that still is by today's standards, it represents more than twice the country's whole gross domestic product in 1940, when the mobilization began.
This extraordinary effort was only conceivable because of three factors:
* The comparatively low preexisting levels of taxation, spending and debt.
* The political feasibility of progressive taxation.
* The rapid growth of the U.S. economy during (and after) the war.
The low preexisting levels of spending and debt allowed the U.S. government great scope in raising more revenue, by enlarging taxation and borrowing additional funds. In 1940, Federal revenue was equal to 6.8 percent of GDP, while Federal debt came to $52 billion ($790 billion in 2008 dollars) 52 percent of Gross Domestic Product.3 During the war, taxes tripled to over 20 percent of GDP by 1944-45. Debt quadrupled to $260 billion ($3.16 trillion in 2008 dollars) by 1946.4
Progressive taxation was indispensable to that enlargement of taxation. The share of individual income tax in Federal receipts tripled between 1940 and 1944, from 13.6 to 45 percent (and from roughly 1 to 9.4 percent of GDP), with the highest bracket set at 91 percent. Additionally, corporate income tax swelled to a record 39.8 percent of receipts in 1943 (and from roughly 1 percent to about 7 percent of GDP between 1940 and 1944-45).
And of course, economic expansion was the base on which everything else was built. In 1940, American GDP was $101 billion (roughly $1.58 trillion in 2008 dollars) according to the Bureau of Economic Analysis. By 1945, it was $219 billion (or $2.7 trillion), an over 70 percent increase. It was that growth which permitted the U.S. government to take in so much more revenue (equal to 45 percent of 1940 GDP in the last year of the war), and spend so much (the $82 billion defense bill of 1945 being equivalent to a trillion of today's dollars, and roughly 63 percent of 1940 GDP).5
It also enabled the Federal government to bear a vastly expanded debt, about four times as large as at the war's start. Relative to GDP it was twice as big in 1946 as 1940-but just 121 percent of it after the growth of the interceding years.6 With the readjustment of the U.S. economy in the following years, the economy was about as large in 1950 as it had been at the end of the war, but from 1950-1973 it continued to grow rapidly, averaging 4.2 percent a year in real terms. As a result, the level of Federal debt to domestic product actually fell all the way through the 1970s, from its 1946 level to 32 percent in 1981.
A proportionate level of effort today would mean ramping up annual defense spending up to the area of $9 trillion, and $35 trillion for the whole period, supported by the raising of Federal revenues to $7 trillion a year, and the amassing of perhaps $30 trillion in Federal debt, all by 2014. Assuming a reason to attempt such an effort was to appear, does it seem plausible that this would work out?
My conclusion then, which I still stand by, is that it is very doubtful. The U.S. is in most respects a fiscally more constrained country than it was in the years before and after World War II. While the total share of Federal receipts in GDP has dipped somewhat due to the tax cuts after 2001, it is still at 18 percent. Gross Federal debt, which held roughly steady from 1948 to 1981 in real terms (hovering around $2.3 trillion in today's dollars), has since quadrupled, expanding markedly faster than GDP so that it is now equal to 68 percent of Gross Domestic Product, and the continuing deficits may be much worse than they look.7 Progressive taxation on the scale of the World War II era also seems more doubtful, even under emergency circumstances, as Christopher Hood observed in a recent article, "The Tax State in the Information Age."8
Additionally, while future economic growth is hard to predict under such altered circumstances, there are reasons to think it would not be so dramatic. One is that the U.S. economy is far less manufacturing-intensive, and much more service-oriented, meaning slower productivity growth, and overall growth, for the foreseeable future. Meanwhile, it may be that modern industrial bases, geared toward far greater efficiency than the plants of the 1940s were capable of achieving, may secure that efficiency at the price of flexibility. In the event of an emergency requiring a dramatic redirection of industrial output, all of this may imply a frustrating shortage of capacity-and perhaps, an experience more reminiscent of Britain's during the war than the U.S.'s.9
In short, while the U.S. is a much wealthier and more productive society today than it was in the 1940s (with more than five times the GDP of 1945, roughly nine times what it had in 1940), it may have relatively less slack. Those who would resort to the analogy should keep that difference in mind.
1 Slack includes, but is broader than, "mobilizable wealth" as discussed by John Mearsheimer, among others, as slack also includes in-built resilience. For a discussion of mobilizable wealth in international politics, see John J. Mearsheimer, The Tragedy of Great Power Politics (New York: W.W. Norton, 2001), pp. 62-65.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 6.1, p. 109. Some might argue that the full cost of World War II did not end there, considering a range of expenses including the continuing occupations of Germany and Japan. However, the demobilization of U.S. forces was largely completed as of mid-1947, a year in which the defense budget was an eighth of its 1944-45 peak (when it ran nearly a trillion dollars a year, after adjustment for inflation). After that point, the immediate problems of the Cold War could be considered more relevant to defense planning.
3 Budget 2004, Table 1.3, pp. 25-26.
4 Budget 2004, Table 7.1, pp. 116-117.
5 In all, the defense bill came to a quarter of U.S. GDP for the years 1941-6.
6 The enlargement of the size of the government and its debt is even more dramatic if the war is seen as part of a larger crisis, beginning with the Great Depression of 1929. Total government spending went from 9.1 percent of GDP in 1929 to 14.7 percent in 1940, mostly as a result of the Federal government's share of GDP quadrupling from 1.6 percent in 1929 (prior to that time, state and local government were much larger) to 6.8 percent of it in 1940. Gross Federal debt also came close to quadrupling between 1929 and 1940 (from 16 to 52 percent of GDP, even after the economy, between 1936 and 1940, grew 20 percent above its 1929 level), before the war began. Combined with the quadrupling of the debt again in the war years, this resulted in the U.S. carrying fifteen times as much debt in 1946 as it had in 1929. (During the period as a whole, the economy expanded by a factor of two.)
7 Officially, the U.S. Federal deficit in 2006 was $248 billion, roughly two percent of GDP. However, when corporate-style accounting was brought to bear on the problem, the figure was in the area $1.3 trillion, closer to a staggering 9-10 percent. Dennis Cauchon, "Taxpayers on the Hook for $59 trillion," USA Today, May 28, 2007. Accessed at http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm. This is also without considering the likely overstatement of U.S. GDP as a result of inflated growth estimates, particularly during the last decade; and perhaps, other economic changes not adequately registered by GDP, like deindustrialization, the depreciation of infrastructure, and the enlargement of private debt. See Kevin Phillips, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (New York: Viking, 2008), pp. 85-88. According to the think tank Redefining Progress, which developed the Genuine Progress Indicator (GPI) as an alternative, U.S. per capita GPI has stayed roughly flat for the last three decades. See Dr. John Talberth, Clifford Cobb and Noah Slattery, The Genuine Progress Indicator 2006: A Tool for Sustainable Development (Oakland, CA: Redefining Progress, 2007). Accessed at http://www.rprogress.org/publications/2007/GPI%202006.pdf.
8 Christopher Hood, "The Tax State in the Information Age," in T.V. Paul, John A. Hall and G. John Ikenberry, eds., The Nation-State in Question (Princeton, N.J.: Princeton University, 2003), p. 217.
9 An interesting account of this can be found in Paul Kennedy, The Contradiction Between British Strategic Planning and Economic Requirements in the Era of the two World Wars (Washington D.C.: International Security Studies Program, Wilson Center, 1979). The essentials of his analysis can also be found in the latter chapters of his book The Rise and Fall of British Naval Mastery (London: Macmillan, 1983).
Societal Slack and Progressive Taxation
By Nader Elhefnawy
Societal slack is not simply a matter of society's total resources, but specifically those resources which are both unutilized, and accessible for a given purpose, whether absorbing some shock, responding to some challenge or seizing an unforeseen opportunity.
At least according to the conventional measures, today's societies, certainly the advanced industrial ones, are wealthier than they have ever been. Nonetheless, the accessibility of that wealth is another matter, and where taxation (the capacity to bear which is an important part of societal slack) is concerned, financial and political reality has always made income distribution important.
Recent years have seen a trend toward regressive taxation, in the fashion for flat taxes and value-added taxes, and the reduction of taxes paid by corporations and people with high incomes.
The U.S. has been no exception. This may seem surprising, given the publicity afforded to figures released in recent years indicating that the collection of individual income tax has become more rather than less progressive since the 1980s, in particular a widely cited Tax Foundation analysis from last year.1 This holds that the wealthiest 1 percent went from paying 19 percent of Federal income tax to 39 percent of it from 1980 to 2005. However, the same data also indicates that their share of the nation's adjusted gross income went from 8.46 percent to 21.2 percent in the same period. This means that even as their share of the country's wealth went up 150 percent, their share of the income tax bill only went up 107 percent. In other words, the growth of their share of the wealth outpaced the growth of their share of the tax burden, implying the reverse.
Of course, one can object that the Tax Reform Act of 1986 made data from before 1987 not strictly comparable with that from later years. However, such a trend is also clearly visible in the years after that date. From 1987 to 2005, the top 1 percent's share of national income went up 72 percent, its share of the tax bill just 59 percent-indicating a regressive change, not a progressive one at that level.
The claims for the progressive character of American taxation are also, and more significantly, offset by the dramatic reduction in corporate income tax. In 1944-45, this equaled 35 percent of Federal receipts, or about 7 percent of GDP.2 While it was quickly cut after World War II, it did not fall below 20 percent of Federal receipts until 1968. Since 1981, it has never accounted for more than 11 percent of receipts, or 2 percent of GDP, save for the 1994-2001 period when it reached and sometimes slightly exceeded that level.
At the same time, social insurance and retirement receipts have accounted for much more of Federal revenue, rising from 7.6 to 37 percent of receipts (1.6 to 6.7 percent of GDP) between 1945 and 1988, a level at which they have stayed since.3 This has been especially important given that borrowing from the Social Security account has been crucial to reducing government borrowing from external sources (creating the illusion of smaller deficits than would otherwise be the case) since the Bush I administration.4
The result, especially given a picture of widening inequality, is an increased reliance of the Federal tax base on a decreasing portion of the nation's wealth. Of course, one can argue that this situation, despite its frequent characterization as somehow inherent in the logic of twenty-first century economic life, may not be that after all; and that in an emergency warranting such action, governments would alter their tax pattern to take fuller advantage of their economic bases. During World War II, for instance, the Federal government levied famously high taxes on individual and corporate incomes (which began to drop soon after, though the sharpest cuts awaited the Reagan era). Nonetheless, governments do not always succeed in adopting such policies, the division over taxes producing a crucial divide among the elite in pre-revolutionary France, among other instances. Additionally, their response in a situation where the problem that needs to be met is less obvious, slower-moving or simply more prolonged (as is often expected to be the case with many of the twenty-first century's challenges) is likely to be far more muddled.
1 See Gerald Prante, "Summary of Latest Federal Individual Income Tax Data," Tax Foundation Fiscal Fact 104, Oct. 5, 2007.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 2.2, pp. 31-32 and Table 2.3, pp. 33-34.
3 Keep in mind that Social Security this year was levied on only the first $102,000 of income; while Medicare is supported by a flat tax. Social Security Adminsitration, Social Security Update 2008. Accessed at http://www.ssa.gov/pubs/10003.html.
4 One should also keep in mind that state and local taxes, not insignificant in the United States given its Federal structure, tend to be far less progressive.
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Societal slack is not simply a matter of society's total resources, but specifically those resources which are both unutilized, and accessible for a given purpose, whether absorbing some shock, responding to some challenge or seizing an unforeseen opportunity.
At least according to the conventional measures, today's societies, certainly the advanced industrial ones, are wealthier than they have ever been. Nonetheless, the accessibility of that wealth is another matter, and where taxation (the capacity to bear which is an important part of societal slack) is concerned, financial and political reality has always made income distribution important.
Recent years have seen a trend toward regressive taxation, in the fashion for flat taxes and value-added taxes, and the reduction of taxes paid by corporations and people with high incomes.
The U.S. has been no exception. This may seem surprising, given the publicity afforded to figures released in recent years indicating that the collection of individual income tax has become more rather than less progressive since the 1980s, in particular a widely cited Tax Foundation analysis from last year.1 This holds that the wealthiest 1 percent went from paying 19 percent of Federal income tax to 39 percent of it from 1980 to 2005. However, the same data also indicates that their share of the nation's adjusted gross income went from 8.46 percent to 21.2 percent in the same period. This means that even as their share of the country's wealth went up 150 percent, their share of the income tax bill only went up 107 percent. In other words, the growth of their share of the wealth outpaced the growth of their share of the tax burden, implying the reverse.
Of course, one can object that the Tax Reform Act of 1986 made data from before 1987 not strictly comparable with that from later years. However, such a trend is also clearly visible in the years after that date. From 1987 to 2005, the top 1 percent's share of national income went up 72 percent, its share of the tax bill just 59 percent-indicating a regressive change, not a progressive one at that level.
The claims for the progressive character of American taxation are also, and more significantly, offset by the dramatic reduction in corporate income tax. In 1944-45, this equaled 35 percent of Federal receipts, or about 7 percent of GDP.2 While it was quickly cut after World War II, it did not fall below 20 percent of Federal receipts until 1968. Since 1981, it has never accounted for more than 11 percent of receipts, or 2 percent of GDP, save for the 1994-2001 period when it reached and sometimes slightly exceeded that level.
At the same time, social insurance and retirement receipts have accounted for much more of Federal revenue, rising from 7.6 to 37 percent of receipts (1.6 to 6.7 percent of GDP) between 1945 and 1988, a level at which they have stayed since.3 This has been especially important given that borrowing from the Social Security account has been crucial to reducing government borrowing from external sources (creating the illusion of smaller deficits than would otherwise be the case) since the Bush I administration.4
The result, especially given a picture of widening inequality, is an increased reliance of the Federal tax base on a decreasing portion of the nation's wealth. Of course, one can argue that this situation, despite its frequent characterization as somehow inherent in the logic of twenty-first century economic life, may not be that after all; and that in an emergency warranting such action, governments would alter their tax pattern to take fuller advantage of their economic bases. During World War II, for instance, the Federal government levied famously high taxes on individual and corporate incomes (which began to drop soon after, though the sharpest cuts awaited the Reagan era). Nonetheless, governments do not always succeed in adopting such policies, the division over taxes producing a crucial divide among the elite in pre-revolutionary France, among other instances. Additionally, their response in a situation where the problem that needs to be met is less obvious, slower-moving or simply more prolonged (as is often expected to be the case with many of the twenty-first century's challenges) is likely to be far more muddled.
1 See Gerald Prante, "Summary of Latest Federal Individual Income Tax Data," Tax Foundation Fiscal Fact 104, Oct. 5, 2007.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 2.2, pp. 31-32 and Table 2.3, pp. 33-34.
3 Keep in mind that Social Security this year was levied on only the first $102,000 of income; while Medicare is supported by a flat tax. Social Security Adminsitration, Social Security Update 2008. Accessed at http://www.ssa.gov/pubs/10003.html.
4 One should also keep in mind that state and local taxes, not insignificant in the United States given its Federal structure, tend to be far less progressive.
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Friday, January 2, 2009
50 Best Inventions (?)
Time magazine has offered a list of the year's fifty best inventions.
Unfortunately, the list makes me wonder if the people who compiled the list even know what an invention is. I like Hulu.com, but does it really count as an "invention" in the same way that "smog-eating cement" (#37) does, and if so, does Hulu.com really rate the number four slot? What about "Facebook for Spies" (#32)? For that matter, why do several different brands of electric car rate different slots, the Tesla Roadster (#2), the Chevy Volt (#7), the Aptera Electric Car (#46) each get their own, even though the hyperlinked articles do not show them to contain any really different, fundamental innovations?
Even sloppier, many of the things that may actually be considered "inventions" have yet to be invented properly speaking, the more exciting items generally just concepts characterized as still in development, like "Green Crude" (#11), or "Airborne Wind Power" (work on which did not begin in 2008, but much earlier, and which will deserve much more than the crummy #35 awarded it here if the R & D folks deliver the goods).
Most of the items on the round-up are certainly worth knowing about, but the presentation is a reminder of the execrable quality of journalism about science and technology, to which this article is no exception.
Unfortunately, the list makes me wonder if the people who compiled the list even know what an invention is. I like Hulu.com, but does it really count as an "invention" in the same way that "smog-eating cement" (#37) does, and if so, does Hulu.com really rate the number four slot? What about "Facebook for Spies" (#32)? For that matter, why do several different brands of electric car rate different slots, the Tesla Roadster (#2), the Chevy Volt (#7), the Aptera Electric Car (#46) each get their own, even though the hyperlinked articles do not show them to contain any really different, fundamental innovations?
Even sloppier, many of the things that may actually be considered "inventions" have yet to be invented properly speaking, the more exciting items generally just concepts characterized as still in development, like "Green Crude" (#11), or "Airborne Wind Power" (work on which did not begin in 2008, but much earlier, and which will deserve much more than the crummy #35 awarded it here if the R & D folks deliver the goods).
Most of the items on the round-up are certainly worth knowing about, but the presentation is a reminder of the execrable quality of journalism about science and technology, to which this article is no exception.
Thursday, December 25, 2008
Saturday, December 13, 2008
The Situation in Greece: Update
This article in today's Guardian provides some additional, useful background to, and clarification of, the events in Greece I have been following on this blog.
Some interesting points the article raises:
*The Greek police are running out of tear gas, and contacting Israel and Germany for fresh stocks, a testament to the scale and length of the clashes-or, depending on how you look at it, how unprepared the authorities were for a situation like this.
*The recent police shooting of a fifteen year-old youth was not a unique occurrence, but only unique in that the victim was an ethnic Greek, rather than an immigrant or Roma, whose deaths "do not make the media." Additionally, the scene of the shooting has long been "aggressively policed."
*While some have drawn attention to the strength of the "extreme left in the country," as the spokesman for the French Interior Ministry put it in a statement that much of the media has been quick to quote, it would be a mistake to overlook the strength of the extreme right. As the article notes, "the populist Orthodox Rally won 10 seats in parliament for the first time last year, and the neo-fascist Golden Dawn organisation is known to have supporters inside the police."
As the article also notes:
Some interesting points the article raises:
*The Greek police are running out of tear gas, and contacting Israel and Germany for fresh stocks, a testament to the scale and length of the clashes-or, depending on how you look at it, how unprepared the authorities were for a situation like this.
*The recent police shooting of a fifteen year-old youth was not a unique occurrence, but only unique in that the victim was an ethnic Greek, rather than an immigrant or Roma, whose deaths "do not make the media." Additionally, the scene of the shooting has long been "aggressively policed."
*While some have drawn attention to the strength of the "extreme left in the country," as the spokesman for the French Interior Ministry put it in a statement that much of the media has been quick to quote, it would be a mistake to overlook the strength of the extreme right. As the article notes, "the populist Orthodox Rally won 10 seats in parliament for the first time last year, and the neo-fascist Golden Dawn organisation is known to have supporters inside the police."
As the article also notes:
The teenagers and twenty-somethings who have come close to toppling the Greek government are not the marginalised: this is no replay of the riots that convulsed Paris in 2005. Many are sons and daughters of the middle classes, shocked at the killing of one of their own, disgusted with the government's incompetence and corruption, enraged by the broken promises of the education system, scared at the prospect of having to work still harder than their exhausted parents . . .That fact may not be comforting, but it would be a grave error to overlook it, especially because, as the sympathy for the protests has evoked in other countries demonstrates, Greece is far from being the only country in such a bind.
Anarchist groups dreaming of revolution played a key part in the first waves of destruction, but this week's protests were not orchestrated by the usual suspects, who relish a good bust-up and a whiff of teargas. There's been no siege of the American embassy, no blaming Bush, very few party slogans.
Though the spectacular violence has dominated the news, thousands have also set out to join in peaceful demonstrations, among them parents worried for their children's future. Linked by the internet, by twitter and text messages, many are trying to distance themselves from the destruction, which they attribute to "extremists, idiots and provocateurs."
Friday, December 12, 2008
The Return of the Russian Navy
While the plans for it got quite a bit of publicity a few months ago, it seems that the Russian-Venezuelan naval exercises (which included the participation of the Russian battle-cruiser Peter the Great) drew little attention when they actually took place at the start of the month.
Incidentally, the exercises were followed up by the Russian navy paying a visit to Nicaragua before heading east via the Panama Canal, the first time Russian warships have used the canal since 1944. Next up for the Peter the Great is a trip to the Indian Ocean, where it is to take part in exercises with the Indian navy and help in "maintaining a regular [Russian naval] presence" off the Horn of Africa. According to the Times of India this will be the fourth Indo-Russian exercise since 2003, which included one in the Sea of Japan last year.
And of course, there are all the more unlikely stories, like the idea of relocating the Black Sea fleet to a base in Syria (at which point, it would of course need to be renamed).
One has to wonder what to make of all this. Today's Russia is not the Soviet Union, nor can it seriously hope to be. Where the Soviet Union in the late 1980s had perhaps 6 perhaps of the world's population and accounted for 12 percent of global GDP (to say nothing of having its troops sitting on half of Europe), today's Russia has a little more than 2 percent of the world's population (and shrinking in absolute as well as relative terms), maybe 3 percent of global GDP-and that because of a rise in oil prices, which since July has gone into reverse. (Believe it or not, today's Russia is actually less industrialized than it was in the Soviet period.)
I expect oil prices to rebound, perhaps in the not too distant future, but even were they to do so, oil alone cannot sustain a superpower's ambitions (and anyway, the benefit Russia derives may be undercut by its peaking production, the worries of foreign investors and the country's own consumption growth), while at the same time, being likely to hobble the country's continued development with a well-known "resource curse." (I discussed the issue at some length in an analysis of the Russian economy for the Space Review back in November.)
In short, the power base isn't there. In fact, as the strain of defense spending on the Soviet economy showed, it wasn't really there even then. The result is that it looks more than anything else like grandstanding off of old military-industrial capital and new petrodollars to score some prestige points (and in cases, prop up a few friends and clients), while hoping that the limited positive signs seen to date will lead to a more substantial recovery enabling it to really fill that enlarged role.
Right now that looks like a long shot, and in any case, it would seem that the money (while admittedly limited next to what the Soviets spent on their military) would be much better spent on rebuilding infrastructure, restoring public health and making other desperately needed investments at home. For that matter, it might have been expended reforming the horrendous conditions faced by Russian conscripts during their national service (or better still, ending conscription, and moving to an all-professional force).
Incidentally, the exercises were followed up by the Russian navy paying a visit to Nicaragua before heading east via the Panama Canal, the first time Russian warships have used the canal since 1944. Next up for the Peter the Great is a trip to the Indian Ocean, where it is to take part in exercises with the Indian navy and help in "maintaining a regular [Russian naval] presence" off the Horn of Africa. According to the Times of India this will be the fourth Indo-Russian exercise since 2003, which included one in the Sea of Japan last year.
And of course, there are all the more unlikely stories, like the idea of relocating the Black Sea fleet to a base in Syria (at which point, it would of course need to be renamed).
One has to wonder what to make of all this. Today's Russia is not the Soviet Union, nor can it seriously hope to be. Where the Soviet Union in the late 1980s had perhaps 6 perhaps of the world's population and accounted for 12 percent of global GDP (to say nothing of having its troops sitting on half of Europe), today's Russia has a little more than 2 percent of the world's population (and shrinking in absolute as well as relative terms), maybe 3 percent of global GDP-and that because of a rise in oil prices, which since July has gone into reverse. (Believe it or not, today's Russia is actually less industrialized than it was in the Soviet period.)
I expect oil prices to rebound, perhaps in the not too distant future, but even were they to do so, oil alone cannot sustain a superpower's ambitions (and anyway, the benefit Russia derives may be undercut by its peaking production, the worries of foreign investors and the country's own consumption growth), while at the same time, being likely to hobble the country's continued development with a well-known "resource curse." (I discussed the issue at some length in an analysis of the Russian economy for the Space Review back in November.)
In short, the power base isn't there. In fact, as the strain of defense spending on the Soviet economy showed, it wasn't really there even then. The result is that it looks more than anything else like grandstanding off of old military-industrial capital and new petrodollars to score some prestige points (and in cases, prop up a few friends and clients), while hoping that the limited positive signs seen to date will lead to a more substantial recovery enabling it to really fill that enlarged role.
Right now that looks like a long shot, and in any case, it would seem that the money (while admittedly limited next to what the Soviets spent on their military) would be much better spent on rebuilding infrastructure, restoring public health and making other desperately needed investments at home. For that matter, it might have been expended reforming the horrendous conditions faced by Russian conscripts during their national service (or better still, ending conscription, and moving to an all-professional force).
The Situation in Greece
The unrest in Greece (which has included peaceful protests and strikes as well as the highly publicized street fights) is a week old now, and the event itself is increasingly internationalized. A new Reuters article, "Angry young Greeks give wake-up call to Europe"-incidentally, the most comprehensive piece on these events that I have seen so far-describes "sympathy protests from Moscow to Madrid, some quickly organised over the Internet or by SMS message, as many young people feel leaders are ignoring their frustrations." Some were violent, the article citing incidents in Spain, Italy, Denmark and even Russia, as well as the setting afire of two cars outside a Greek consulate in France.
While the Reuters article goes into the issue in somewhat more depth, the journalistic coverage in general increasingly acknowledges the economic factors in these events, echoing much of what I blogged about on Wednesday. These include high youth unemployment (Generation 700 Euros describes "Young Greeks, even those up to the age of 35, make up a silent majority of overworked, underpaid, debt-ridden and insecure citizens," 56 percent of Greeks under 30 earning less than that amount per month), high levels of poverty (20% of households living on less than $7,300 a year), an exceptionally ineffective (mismanaged?) welfare system (highlighted by the government's inadequate poor relief this winter), and inflation that has been worse than the "faked reported values" used by the country's leaders to meet the criteria for accession to the eurozone. The government's combo of a neoliberal hard line and generous corporate welfare (in particular a highly controversial financial bail-out (relative to the size of the Greek economy, equivalent to a $1.5 trillion package in the U.S.)) has not exactly increased the confidence of a public which already views the nation's leadership as corrupt and incompetent (its handling of last year's wildfires a particular sore point).
When I first looked at the situation, I thought of the anomalousness of Greek politics (its radicalization by the junta years of 1967-74, etc.), but given the economic context it occurred to me that if Greece is vulnerable, then a lot of other countries are too. It now seems others are saying the same thing, as the Reuters article shows. Check out this excerpt from it about Nicolas Sarkozy's reaction:
"Look what is going on in Greece!" French President Nicolas Sarkozy told members of his UMP party, rejecting budget proposals which would have cushioned the wealthy from losses.
With memories fresh of weeks of suburban rioting in 2005, Sarkozy expressed concern the anti-government backlash could spread to France: "The French love it when I'm in a carriage with Carla, but at the same time they've guillotined a king."
The man's pretensions to being a latter-day Sun King never cease to amaze me, emerging even in this attempt to sound conciliatory, but I am even more amazed at the imagery he evokes in this comment. Especially when one considers that much of Europe is in roughly the same position as Greece with regard to slowing growth, high unemployment (in general, but particularly among the young) and unpopular neoliberal reforms, it is clear that the potential for such outbursts has been underestimated in the media's preoccupation with immigration and culture wars.
Yet, there is also a danger of overreaction. This is not the French Revolution, and it would be highly regrettable if governments across the continent were to use this as an excuse to engage in repressive measures (hinted at in the anxiety expressed by the authorities in this Wall Street Journal article), rather than considering and addressing their pressing domestic problems.
While the Reuters article goes into the issue in somewhat more depth, the journalistic coverage in general increasingly acknowledges the economic factors in these events, echoing much of what I blogged about on Wednesday. These include high youth unemployment (Generation 700 Euros describes "Young Greeks, even those up to the age of 35, make up a silent majority of overworked, underpaid, debt-ridden and insecure citizens," 56 percent of Greeks under 30 earning less than that amount per month), high levels of poverty (20% of households living on less than $7,300 a year), an exceptionally ineffective (mismanaged?) welfare system (highlighted by the government's inadequate poor relief this winter), and inflation that has been worse than the "faked reported values" used by the country's leaders to meet the criteria for accession to the eurozone. The government's combo of a neoliberal hard line and generous corporate welfare (in particular a highly controversial financial bail-out (relative to the size of the Greek economy, equivalent to a $1.5 trillion package in the U.S.)) has not exactly increased the confidence of a public which already views the nation's leadership as corrupt and incompetent (its handling of last year's wildfires a particular sore point).
When I first looked at the situation, I thought of the anomalousness of Greek politics (its radicalization by the junta years of 1967-74, etc.), but given the economic context it occurred to me that if Greece is vulnerable, then a lot of other countries are too. It now seems others are saying the same thing, as the Reuters article shows. Check out this excerpt from it about Nicolas Sarkozy's reaction:
"Look what is going on in Greece!" French President Nicolas Sarkozy told members of his UMP party, rejecting budget proposals which would have cushioned the wealthy from losses.
With memories fresh of weeks of suburban rioting in 2005, Sarkozy expressed concern the anti-government backlash could spread to France: "The French love it when I'm in a carriage with Carla, but at the same time they've guillotined a king."
The man's pretensions to being a latter-day Sun King never cease to amaze me, emerging even in this attempt to sound conciliatory, but I am even more amazed at the imagery he evokes in this comment. Especially when one considers that much of Europe is in roughly the same position as Greece with regard to slowing growth, high unemployment (in general, but particularly among the young) and unpopular neoliberal reforms, it is clear that the potential for such outbursts has been underestimated in the media's preoccupation with immigration and culture wars.
Yet, there is also a danger of overreaction. This is not the French Revolution, and it would be highly regrettable if governments across the continent were to use this as an excuse to engage in repressive measures (hinted at in the anxiety expressed by the authorities in this Wall Street Journal article), rather than considering and addressing their pressing domestic problems.
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