Is an "Emerging Markets" debt crisis imminent?

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Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

(Once upon a time D&D had threads that actually discussed discrete individual topics rather than covering a huge geographical region or sprawling subject matter. I thought I'd see if there's still any appetite for more narrowly focused discussions.)

Emerging markets have been one of the relative success stories of the last decades and helped push up global growth at a time that the developed world was doing poorly. I thought it would be interesting to discuss their prospects for future growth given that their role in the global economy has increased so substantially. The topics covered in this article - the relationship between credit buildups, economic crises and future growth rates - also seem to have a more general relevance to the global economy these days.

The title of the thread may be slightly misleading, insofar as the article below isn't quite predicting a dramatic crash. It would seem the worry here, at least as far as the Economist is concerned, is the risk of much lower global growth. Of course other economists like Nouriel Rourbini have been warning that the global economy is much less stable than this article suggests. And other economists like Paul Krugman and Larry Summers have also sounded the alarm about potentially lower growth rates in the future.

It hardly needs to be said that plenty of heterodox or radical economists have also warned about debt buildups, the instability of the global economy, or emerging markets. I encourage others to bring those analyses into this discussion but I thought for the OP I'd focus on what certain "mainstream" economic commentators are saying, both for the sake of brevity and because I think it's interesting to see how the "establishment", so to speak, articulates it's concerns about the global economy and tries to conceive of solutions. Summers and Krugman, for instance -- though not responding specifically to the concerns raised in this article -- are both advocates of more aggressive monetary and fiscal policy to deal with the risks of global "secular stagnation".

The Economist posted:

Pulled back in

The world is entering a third stage of a rolling debt crisis, this time centred on emerging markets
Nov 14th 2015 | From the print edition

BY THE time the third film in a franchise comes around, it is not just audiences that may be getting restive; the characters themselves have been known to complain. It is his inability to put the sins of screenplays past behind him that gives Al Pacino�s Michael Corleone the most memorable line in �The Godfather: Part III�: �Just when I thought I was out, they pull me back in!�

As with anti-heroes in sequels, so with the world�s debt crisis; seeming conclusions serve only to set the narrative off in new directions. Householders in America have struggled for years to work off the excess borrowing taken on during a global housing boom in the 2000s. The economy has suffered from a shortfall of spending as a consequence. The world economy was dealt a second blow, after 2010, when the delayed effects of that earlier boom were played out in a debt crisis at the fringes of the euro area, one that at several points threatened to break up the currency union.

America has put that crisis behind it. Consumer spending is rising at a healthy 3% or so. Nominal wages are beginning to edge up in response to a tighter labour market, leaving the Federal Reserve poised to increase interest rates for the first time since 2006 (see article). And household debt looks as if it is bottoming out. Much the same is happening in Britain, which suffered a boom and hangover quite like America�s (see chart 1).

Europe was slower in dealing with its debt and always tends to lag behind America and Britain in its economic cycle. Nevertheless it is having its best year of growth since 2011. It is for these reasons, among others, that the IMF is predicting that world GDP will pick up to 3.6% next year; not the sort of growth seen in the early 2000s, or when emerging markets were booming after the financial crisis, but not too shabby, considering the slowdown in the developing world that started a few years ago.

Yet just as the rich world seems to be getting shot of its dodgy legacy of indebtedness, it risks being dragged back into the mire by a third leg of the debt crisis. The debt that built up in emerging markets after the American bust is still there. It has continued to grow even as the economies have slowed, and now overhangs them ominously. In the past, the rich world had the muscle to shake off such problems elsewhere. But emerging markets now make up most of the world economy (around 58% if exchange rates are measured at purchasing-power parity). They are quite capable of weighing down rich-world recoveries�especially if, as in Europe, they are already fragile ones. Taking full account of the effects of emerging-market debt makes the world economy look far less secure.

The burdens of past opportunities
The build-up of emerging-market credit began just as the rich world�s financial system started to creak in 2007. According to figures collated by J.P. Morgan, a bank, private-sector debt in emerging markets rose from 73% of GDP at the end of 2007 to 107% of GDP by the end of last year. These figures include loans made by banks and bonds issued by companies. Including the credit extended by non-bank financial institutions (so-called �shadow banks�) for the handful of emerging markets where such estimates are available gives a steeper rise and a higher total burden: 127% of GDP.

The credit boom in emerging markets was in large part a response to the credit bust in the rich world. Fearing a depression in its richest export markets, the authorities in China brought about a massive increase in credit in 2009. Meanwhile a flood of capital escaping the paltry yields on offer in developed economies pushed interest rates lower in developing ones. This search for yield by rich-world investors took them to ever more exotic places. A dollar-denominated government bond issued in 2012 by Zambia, a copper-rich country with an average GDP per person of $1,700 a year, offered just 5.4% interest; even so, it was 24 times oversubscribed as rich-world investors clamoured to buy. The following year a state-backed tuna-fishing venture in Mozambique, a country even poorer than Zambia, was able to raise $850m at an interest rate of 8.5%.

In contrast to the credit booms in America and Europe, where households were the main borrowers, three-quarters of the private debt burden in emerging markets is shouldered by businesses: corporate debt has ballooned from less than 50% of GDP in 2008 to almost 75% by 2014. Much of the lending was done in Asia, notably in China. But Turkey, Brazil and Chile also saw substantial increases in the ratio of company debt to GDP (see chart 2). Construction firms (notably in China and Latin America) increased their leverage a great deal. The oil and gas industry was a big player, too, according to the IMF�s latest Global Financial Stability Report.

Growing debt in emerging markets is not of itself something to worry about. It may be that savings are getting into local capital markets more effectively or that there are more, better investment opportunities. Sadly, those happy possibilities do not seem to account for what is now going on. While corporate leverage in emerging markets has been going up, corporate profitability there has fallen, says the IMF. There is plenty of evidence to suggest that rapid debt build-ups are the hallmarks of periods of indiscriminate lending that eventually end in tears.

David Mackie, of J.P. Morgan, has analysed 52 episodes in which the ratio of private debt to GDP increased by at least 20 percentage points over five years. He found that annual GDP growth falls by almost three percentage points in the three years after the debt ratio peaks. The impact is less severe in countries where the peak is not marked by a crisis of some sort. His finding is backed up by academic research. A paper by Alan Taylor and Oscar Jorda, of the University of California, Davis, and Moritz Schularick, of the Free University of Berlin, shows that in the rich world recessions preceded by unusually rapid bank-credit growth are followed by weaker recoveries. Looking at the way credit moves up and down as a proportion of GDP, they found that larger increases in credit on the upswing were correlated with deeper recessions and slower recoveries.

Indeed, credit booms are among the most reliable signals that trouble is brewing. Research by Pierre-Olivier Gourinchas of the University of California, Berkeley, and Maurice Obstfeld, now the IMF�s chief economist, finds that credit booms have been one of the two best predictors of crises in emerging markets (the other is a rapidly appreciating real exchange rate). Increasing the credit-to-GDP ratio by nine percentage points is associated with higher probabilities of various misfortunes. In the subsequent three years the probability of a sovereign-debt default goes up by 11.5%, that of a currency crisis increases by 9.4% and that of a banking crisis by 6.4%.

Taken together, such studies of the aftermath of credit booms strongly suggest that growth in emerging markets will be much slower than it was in the early 2000s and the early 2010s. With recessions already under way in Brazil and Russia, this should temper any expectations that growth in emerging markets as a whole is going to buoy up the rest of the world.

There are reasons not to overdo the gloom. Evidence suggests that corporate-lending splurges, which account for most of what is being seen in emerging markets, are less damaging than big build-ups in consumer debt of the sort seen in America in the 2000s. A paper by Boris Courn�de and Oliver Denk of the OECD, a think-tank, finds that corporate-debt booms are only half as damaging to subsequent growth in GDP per person as soaring consumer debt. Research from Atif Mian and Emil Verner of Princeton University and Amir Sufi of the University of Chicago Booth School of Business also suggests, albeit tentatively, that the link between rising debt and falling GDP growth is weaker where lending is to companies and not households. Declines in house prices might make busts in mortgage lending more damaging than corporate-debt crashes, because they depress the wealth of all consumers, and not just the indebted.

Broader changes in the world economy militate against a repeat of famous emerging-market blow-ups at the end of the 20th century, such as Mexico�s �tequila crisis� in 1994 or the Asian financial crisis of the late 1990s. In the past rich-world banks lent to poorer countries in dollars. That meant that when things went pear-shaped wilting local currencies made debt burdens even larger. This time, though, much of the flood of capital has gone into local-currency bonds, which means that when currencies weaken, some of the losses are automatically shared with rich-world investors. It is still a hit�but spread out this way it does not have the same impact. What is more, memories of crises past have prompted Asian governments, in particular, to build up their foreign-exchange reserves. They are now a bulwark against a sudden exit of foreign capital. Still, some companies will face a mismatch between their earnings (in local currency) and their debts, and an arsenal of reserves may not help them. After all, the foreign-exchange reserves are held by governments, not companies. �In a crisis the money is in one place but the holes are in a different place,� says Mr Taylor.

Even allowing for mitigating factors, the scope for the debt saga�s latest instalment to do more damage is clear. Brazil and Russia are already mired in deep recessions. The IMF reckons Brazil�s GDP will shrink this year by around 3% and Russia�s by 4%. South Africa, Turkey and Malaysia have seen their currencies plummet over the past two years. After 2007 capital flooded from rich markets into emerging ones (see chart 3). But now it is flowing the other way. Rising interest rates in America might turn that reversal into a rout.

Market triage

This makes it difficult to be optimistic about emerging markets in general. But �it is also hard to think of who might blow up,� says George Papamarkakis of North Asset Management, a hedge fund. This is in part because, as Manoj Pradhan of Morgan Stanley notes, there are two types of emerging markets, and those with the largest debt are not in general of the type more disposed to acute crises.

The classic sort of emerging market has a current-account deficit and is prone to inflation. Its central bank has to pay obsessive attention to the exchange rate: too low and it stokes inflation; too high and it hurts exports. The other kind, too new to feature in textbooks on emerging-market crises, has a hearty current-account surplus, huge foreign-exchange reserves and decent public finances�but lots of private debt and an excess of goods-producing capacity, leaving it prone to deflation.

The most highly indebted emerging markets, such as China, South Korea, Singapore and perhaps Thailand, mostly fall into Mr Pradhan�s second category. They are unlikely to suffer an abrupt crash brought on by capital flight; most of them have formidable defences against a balance-of-payments crisis. But that stability also means the problems brought on by excess debt are likely to linger for years. With inflation absent interest rates can be kept low; that makes the carrying cost of debt manageable, at least for a while. And banks heavily influenced by governments may be unwilling to tackle non-performing corporate loans, because they will result in factory shutdowns. Instead the debt overhang is perpetuated as bad loans are rolled over, creating zombie companies and industries. Overcapacity pushes down factory-gate prices, which hurts profits and investment. Capital is trapped in underperforming businesses and sectors, which steadily saps GDP growth.

A second group of countries, including Brazil and Turkey, is at more immediate risk. These are emerging economies of the more classic type. They saw a build-up in private debt after 2007, much of it in the corporate sector. Their big current-account deficits make them reliant on foreign lending to sustain GDP growth. As the prospect of interest-rate increases by the Federal Reserve draws capital back to America, such countries become more vulnerable to further currency weakness. That stokes inflation. The higher interest rates required to curb inflation and to slow capital outflows make servicing debt more costly. In such circumstances, the pressure to address the debt problem is greater and the impact on the economy is potentially more dramatic; these are the countries that are most at risk of true crises. Not all of the countries in this sort of danger have current-account deficits. Malaysia runs a surplus, but probably still belongs in this category because of its high private-sector debt (181% of GDP), its weakening currency and its strong trade ties to China�s slowing economy.

There is a third sort of emerging market, though: economies that are either less blighted by private-sector debt or have other reasons to be optimistic about growth. India belongs here. Like others in Asia, India saw corporate credit soar after 2007. But its investment boom hit the buffers earlier than in other places; overall private-sector debt was a comparatively modest 60% of GDP in 2014 (though this is also in large part because the market for consumer debt is under-developed). The central bank has put pressure on state-owned banks to recognise bad debts, and bankruptcy legislation to help clear up the mess that goes along with them is pending.

The IMF expects Indian GDP to rise by 7.3% in 2016, which will make it the world�s fastest-growing big economy. It is less affected by the slowdown in China than other Asian economies, and the halving in oil prices which has hit Asian producers like Malaysia hard has been a boon to India, which imports 80% of the oil it consumes. The current account has moved closer to balance, in part because of low oil prices but also because of the prompt action taken after concerns about capital starting to leave emerging markets sparked a mini-crisis (the so-called �taper tantrum�) in 2013. Inflation, which was in double-digits in 2013, was down to 4.4% in September; the oil price has helped, but so have measures to curb food-price inflation. Interest rates have been steadily reduced this year from 8% to 6.75%, and there is scope for the central bank to make further cuts.

Glimmerings of hope

The trouble in Brazil and Russia, and the volatility of China�s stockmarket, have made India an increasingly attractive haven. But look harder and it is possible to find other biggish developing economies that are not afflicted by a corporate-debt overhang. Mexico, though an oil exporter, saw only a modest increase in credit growth after 2007. Its private-debt burden rose to just 35% of GDP by the end of last year. It is more closely tied to America, an economy that is escaping its private-debt problems, than to China, which has yet to deal with them.

Pakistan, like India, benefits from low oil prices and has seen a dramatic fall in inflation and a pick-up in GDP growth. Argentina has barely any private debt and could shed its reputation for chronic economic mismanagement if Mauricio Macri, a reformer, wins presidential elections this month. Russia, though still mired in recession, might return to growth sooner than many expect in response to a quite brutal devaluation of the rouble. �It is hard for Russia to go down much further,� reckons Mr Pradhan. Its central-bank governor, Elvira Nabiullina, is well regarded. And like India, Russia has relatively high interest rates, giving it �an arsenal of monetary policy� to bring to bear.

In the immediate aftermath of 2007 the growth rate of the world economy was a contest between emerging markets, which pressed forward, and the obstructions put in the way of progress by the woes of the rich world. The tables have now turned, with debt poised to exacerbate crises in some parts of the developing world and dent long-term prospects in others.

The response of rich-world central banks to the anxieties this turnaround provokes provides clues to how each region will be affected. America�s Federal Reserve was poised to raise interest rates in September, but delayed because of worries about China. It now seems set on a rate increase in December. The feeling is that America�s recovery is sufficiently robust to shrug off trouble from elsewhere.

The euro zone, by contrast, looks much less hale. The currency zone is more open to trade than America. Germany in particular has done well out of the corporate-debt boom in emerging markets, which spurred demand for the capital goods it specialises in. So Europe�s recovery, always more fragile than America�s, is at greater risk. Mario Draghi, chief of the European Central Bank, has signalled that further monetary easing, including more quantitative easing and a cut in the central bank�s deposit rate, looks to be on the cards.

More quantitative easing in Europe while America tightens monetary policy is a recipe for a stronger dollar. If the greenback rises far enough, that will hurt export earnings in America, which will eventually feed through to weaker investment and softer GDP growth. The Fed may thus find that even a gradual increase in interest rates will have to be cut short.

Some stories come to a satisfactory end. Some, like the Godfather saga, outstay their welcome. The chronicles of debt seem to fit firmly in the second category. Michael Corleone�s driving ambition was to settle all family business; but nothing stays settled for ever.

# ? Nov 17, 2015 19:53

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# ? Apr 26, 2024 07:46

Guy DeBorgore: Apr 6, 1994; Catnip is the opiate of the masses; Soiled Meat

The article suggests the crisis would be less damaging than Mexico 1994 or East Asia 1997, which raises the question- if it happens, will anyone in the West who doesn't read the business section even notice?

# ? Nov 17, 2015 20:06

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

There's been an "emerging markets" euphoria since the 2008 financial crisis that has completely ignored fundamentals in lieu of making a quick buck, because investors have the memories of goldfish. That it will probably end badly seems like it 'ought to have been apparent for some time.

# ? Nov 17, 2015 20:08

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Guy DeBorgore posted:

The article suggests the crisis would be less damaging than Mexico 1994 or East Asia 1997, which raises the question- if it happens, will anyone in the West who doesn't read the business section even notice?

During the 2000s I think that emerging markets helped prop up global growth rates. Countries like Canada and Australia, for instance, have sold a lot of minerals and other raw resources to China, and the Chinese have bought up lots of foreign assets in the West. An emerging market slowdown or crash could hurt the rest of the global economy. Even if the citizens of other countries don't "notice" the connection they'd still be effected.

Fojar38 posted:

There's been an "emerging markets" euphoria since the 2008 financial crisis that has completely ignored fundamentals in lieu of making a quick buck, because investors have the memories of goldfish. That it will probably end badly seems like it 'ought to have been apparent for some time.

My impression - and others may want to challenge me on this - is that the pool of global funds looking to be invested is far greater than the available investment opportunities. I wonder if this isn't going to be a structural feature of the global economy for some time.

# ? Nov 17, 2015 20:25

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

I think that a lot of it is just perception and the nature of capitalism. If there's a perception that a certain investment has guaranteed returns then people are going to take it for easy money, which I think is one of the big reasons why these debt crises keep on happening repeatedly and nobody ever seems to learn anything. In this case economists, investors, and business strategists were swooning at the BRICS to such a degree that they became convinced that emerging markets were the future, and consequently they inadvertently created a vested interest in ignoring the fundamental problems that these countries have both politically and economically.

# ? Nov 17, 2015 20:37

Guy DeBorgore: Apr 6, 1994; Catnip is the opiate of the masses; Soiled Meat

Helsing posted:

During the 2000s I think that emerging markets helped prop up global growth rates. Countries like Canada and Australia, for instance, have sold a lot of minerals and other raw resources to China, and the Chinese have bought up lots of foreign assets in the West. An emerging market slowdown or crash could hurt the rest of the global economy. Even if the citizens of other countries don't "notice" the connection they'd still be effected.

Yeah, absolutely. And if something serious happens in China that'll make headlines. But it's depressing that nobody remembers, say, the East Asian crisis of 1997, unless they're a serious follower of business news.

quote:

My impression - and others may want to challenge me on this - is that the pool of global funds looking to be invested is far greater than the available investment opportunities. I wonder if this isn't going to be a structural feature of the global economy for some time.

I wouldn't phrase it that way exactly. There's no limit to the amount of investment opportunities out there, but they vary in how safe they are. It would be more accurate to say that there's not enough safe investments, so funds are are channeled towards riskier investments like those in emerging markets. And it definitely seems like there's a structural excess of savings over investment that's lead to a series of bubbles. Before emerging markets there was the sub-prime mortgage market, before that there was dot-coms, before that there were emerging markets again...

I wonder if it's driven by the advent of computers and the information revolution? Each of the recent crises originates in new and technologically-driven markets. And they've been enabled by the information systems that allow investment money to go anywhere in the world easily and quickly.

# ? Nov 18, 2015 04:33

rudatron: May 31, 2011; by Fluffdaddy

This guy beat the economist to the story by a couple of months and makes a few good points: https://thenextrecession.wordpress.com/2015/08/01/the-emerging-market-crisis-returns/, tl;dr unemployment is up and profits are down, emerging markets are approaching a crisis of profitability, much like the first world. The norm is probably goign to be large amounts of capital hunting down every decreasing rates of profits.

edit: whoops, hosed up the link

rudatron fucked around with this message at 17:08 on Nov 18, 2015

# ? Nov 18, 2015 06:07

ronya: Nov 8, 2010; I'm the normal one.

You hate ridden fucks will regret your words when you eventually grow up.

Peace.

rudatron posted:

This guy beat the economist to the story by a couple of months and makes a few good points: https://thenextrecession.wordpress.com/2015/08/01/the-emerging-market-crisis-returns/, tl;dr unemployment is up and profits are down, emerging markets are approaching a crisis of profitability, much like the first world. The norm is probably goign to be large amounts of capital hunting down every decreasing rates of profits.

that thesis exactly the opposite of the Economist's thesis, which is of capital failing to move to the higher-growth higher-return industries, in order to maintain high employment

that aside, the question of (1) who owns the private debt and (2) in what currency is the debt denominated, both seem like salient questions. They're also not answered in the article.

# ? Nov 18, 2015 07:00

TheDeadlyShoe: Feb 14, 2014; pretense is my co-pilot

quote:

The most highly indebted emerging markets, such as China, South Korea, Singapore and perhaps Thailand, mostly fall into Mr Pradhan�s second category. They are unlikely to suffer an abrupt crash brought on by capital flight; most of them have formidable defences against a balance-of-payments crisis. But that stability also means the problems brought on by excess debt are likely to linger for years. With inflation absent interest rates can be kept low; that makes the carrying cost of debt manageable, at least for a while. And banks heavily influenced by governments may be unwilling to tackle non-performing corporate loans, because they will result in factory shutdowns. Instead the debt overhang is perpetuated as bad loans are rolled over, creating zombie companies and industries. Overcapacity pushes down factory-gate prices, which hurts profits and investment. Capital is trapped in underperforming businesses and sectors, which steadily saps GDP growth

totally lost me around here. a lot of 'logically i think this will happen, they're doomed!', no actual examples given that this is happening.

Also, for an article with a big focus on trade and exchange rates, no mention at all at how the TPP might play into this analysis....and then reckons Russia will be fine since it cant go down any further (without mentioning commodity prices.)

Reading the article Rudatron linked and IMO it does a way better job without getting sidetracked by random guys the author interviewed or the stilted Godfather reference.

# ? Nov 18, 2015 11:20

Ardennes: May 12, 2002

It seems more or less indicative of a under-consumption crisis that has been predicted for a while (especially after 2008). Emerging markets (i.e middle income countries) by and large don't have the domestic consumption to promote continued appreciable growth and even if they did they would struggle to promote manufacturing due to the rock bottom nature of manufacturing wages of their competitors (low and very low income countries). These states during the 2000s benefited from a commodity/credit bubble which kept growth robust but ultimately obscured the very real problems that existed with their economies but this has become clearer over time. You can argue some of these states benefited more than others from commodity exports (rather than credit bubbles) but by and large exports at first swelled then there was a second wave of investment that followed.

At this point the higher income economies (including the US) don't have the excess consumer spending to promote imports they need to, and with the march of austerity/wage suppression across the developed world, there isn't any real chance for consumption to increase as a whole. While the Fed has talked up been talking up rates, inflation in the US is still completely flat and while consumer confidence in some ways as returned, the ultimate issue is in the terms of scale the US needs to essential buy versus the debt overhang elsewhere.

The TPP may make a moderate difference in the relevant economies, but ultimately most of the members of the TPP have been trading very liberally with each other for a while. The TPP seems much more about compliance and enforcement than anything else.

Edit: I am surprised the Economist article didn't end with the "need to cut public spending and liberalize labor markets."

Ardennes fucked around with this message at 13:08 on Nov 18, 2015

# ? Nov 18, 2015 12:56

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Guy DeBorgore posted:

I wouldn't phrase it that way exactly. There's no limit to the amount of investment opportunities out there, but they vary in how safe they are. It would be more accurate to say that there's not enough safe investments, so funds are are channeled towards riskier investments like those in emerging markets. And it definitely seems like there's a structural excess of savings over investment that's lead to a series of bubbles. Before emerging markets there was the sub-prime mortgage market, before that there was dot-coms, before that there were emerging markets again...

I wonder if it's driven by the advent of computers and the information revolution? Each of the recent crises originates in new and technologically-driven markets. And they've been enabled by the information systems that allow investment money to go anywhere in the world easily and quickly.

My impression is that the driving force here is what rudatron mentions in his post: while the mass of profits may have increased the rate of profit, at least by some measures, has declined. The result is both an increase in speculative activity and a rolling series of crises that are never fully resolved so much as they are shifted around. Part of the result of that is that periods of strong growth seemingly are either caused by bubbles, or else what is initially strong growth based on economic fundamentals rapidly turns into a bubble.

rudatron posted:

This guy beat the economist to the story by a couple of months and makes a few good points: https://thenextrecession.wordpress.com/2015/08/01/the-emerging-market-crisis-returns/, tl;dr unemployment is up and profits are down, emerging markets are approaching a crisis of profitability, much like the first world. The norm is probably goign to be large amounts of capital hunting down every decreasing rates of profits.

Unfortunately that link is broken for me. Is there any chance you can re-link the article?

TheDeadlyShoe posted:

totally lost me around here. a lot of 'logically i think this will happen, they're doomed!', no actual examples given that this is happening.

Also, for an article with a big focus on trade and exchange rates, no mention at all at how the TPP might play into this analysis....and then reckons Russia will be fine since it cant go down any further (without mentioning commodity prices.)

Reading the article Rudatron linked and IMO it does a way better job without getting sidetracked by random guys the author interviewed or the stilted Godfather reference.

Well keep in mind that The Economist is:

1) A newspaper, not a scholarly journal
2) Advocating a hard right economic perspective

What interests me about this article (and about musings from other orthodox economists like those mentioned in the OP) is that they seem to be describing, in broad strokes and with some analytical differences, a rather Marxian sounding prediction of crisis. Declining investment opportunities for capital leading to speculative activities which inflates bubbles that result in an economic crisis. Whether or not we think that certain heterodox economists have provided better analyses of the same trends (and I'd be inclined to say that they have) part of what interests me about this article is the way that a mainstream conservative economic voice is alluding to the crisis prone nature of contemporary capitalism.

# ? Nov 18, 2015 16:58

Ardennes: May 12, 2002

Helsing posted:

Well keep in mind that The Economist is:

1) A newspaper, not a scholarly journal
2) Advocating a hard right economic perspective

What interests me about this article (and about musings from other orthodox economists like those mentioned in the OP) is that they seem to be describing, in broad strokes and with some analytical differences, a rather Marxian sounding prediction of crisis. Declining investment opportunities for capital leading to speculative activities which inflates bubbles that result in an economic crisis. Whether or not we think that certain heterodox economists have provided better analyses of the same trends (and I'd be inclined to say that they have) part of what interests me about this article is the way that a mainstream conservative economic voice is alluding to the crisis prone nature of contemporary capitalism.

I think the key difference though (from their perspective) they see this largely as situational and/or the result of incompetence rather than a systemic problem with actual economic structure. They have to refuse any overarching explanation for what is happening because then they are practically critiquing capitalism itself.

That said, I think there is a broader story that isn't necessarily only economic in nature but political and historical and reliant on not only key economic assumptions but very clear political choices made after the Second World War. Not only austerity and triangulation, but the structure of international trade as well as the building of Cold War alliances.

# ? Nov 18, 2015 17:08

Bob le Moche: Jul 10, 2011; I AM A HORRIBLE TANKIE MORON
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Helsing posted:

What interests me about this article (and about musings from other orthodox economists like those mentioned in the OP) is that they seem to be describing, in broad strokes and with some analytical differences, a rather Marxian sounding prediction of crisis. Declining investment opportunities for capital leading to speculative activities which inflates bubbles that result in an economic crisis. Whether or not we think that certain heterodox economists have provided better analyses of the same trends (and I'd be inclined to say that they have) part of what interests me about this article is the way that a mainstream conservative economic voice is alluding to the crisis prone nature of contemporary capitalism.

I don't know if it's that surprising that investors themselves come to similar conclusions as Marxist economic theorists do. Many of the ways in which "orthodox" economics typically diverge from marxian analyses have, I would say, more to do with the political role of the discipline in shaping state policy for the benefit of shareholders, or in reassuring the public that the job creators know what they're doing and everything's going to be fine. In terms of investors themselves actually trying to figure out where to put their capital and understanding the economy rationally, it makes sense to me that the analysis would converge.

# ? Nov 18, 2015 17:11

Dreylad: Jun 19, 2001

I know very little about economics so I wont try to comment intelligently. But I did notice that after Piketty's Capital In the Twenty-First Century came out, that a number of articles came out arguing that the emerging markets in South America and Asia countered PIketty's argument that there was growing inequality because of the changing value of labour and capital. For example:

quote:

Much has been said to refute Thomas Piketty�s important book, Capital in the Twenty-First Century, from the perspective of developed countries, but not from the standpoint of emerging markets. His contention that the rate of return of capital, roughly twice the rate of growth of the economy, leads to increasing inequality is not consistent with what has happened in the developing world. His notion that the economy is destined for a modest rate of growth and that the capitalists� share of aggregate income will increase at the expense of workers runs against the evidence coming out of up-and-coming economies.

Before I get into that, I remind readers that various Austrian School economists have exposed significant flaws in Piketty�s understanding of the value of capital and its relation to the return on capital. Randall Holcombe states that the French author gets it backwards when he makes the return on capital dependent on the starting value of capital. It is by discounting the expected return generated by capital goods in the minds of entrepreneurs who combine them productively that an estimate of the value of capital can be reached. Since the discount factor depends of the rate of interest, the same capital goods can have very different values depending on the environment. And the aggregate value of capital doesn�t tell us how many ventures failed.

Spanish economist Juan Ram�n Rallo, for his part, has shown that the rate of return of capital is not the same as the rate of growth of the income generated by capital. It is perfectly possible for the rate of return to be greater than the rate of growth of the economy, and for the ratio between capital and income to be fairly constant throughout the ages, as Piketty himself demonstrates while drawing the wrong conclusion from his data.

None of this disproves that inequality has grown in certain periods. In fact, Piketty shows that the years leading up to the Great Depression and the Great Recession were two such periods. But given that the rate of interest was in both cases manipulated by government, the inequality derived from the increased value of capital was a by-product not of perverse free markets, but of monetary interventionism.

These flaws help us understand why Piketty has not paid enough attention to what the emerging world tell us in relation to capital and income.

Three decades ago half the world population was living on less than $1.25 a day; today only one-fifth finds itself in that condition. About 12 percent of the population of Latin America and the Caribbean were extremely poor at the end of the 1990s; the percentage is half of that today. The key is to be found in the rise of the so-called middle classes. Thanks to Latin America�s increasing role in the world economy (though still rather modest), the number of people who fill the space between the rich and the poor has grown impressively�according to some estimates, by as much as 50 percent in the new millennium.

Part of this was due to economic growth and part an effect of income redistribution. We don�t need the many studies that place the main responsibility on the former to conclude that investments seeking a return were crucial. The countries that invested less and redistributed more, such as Venezuela, are the ones where the middle classes have been hurt the most in recent years. In Chile, Peru, and Colombia, where the rate of private investment has reached 20 to 25 percent as a percentage of GDP, they have expanded. Only 14 percent of Chileans are poor, and the percentage of poor Peruvians has dropped almost by half since 2001. The capital invested produced value, which generated jobs and better incomes for millions, which led to an expansion of the middle classes. And what did they do? They got their hands on capital, of course, to create even more value.

According to Piketty, about half of the total value of capital is linked to housing in developed countries. Since people in emerging countries are not Martians, they have also sought to own property. And not just houses: in many countries, they own stock through private pension accounts. Their assets have generated income, part of which has been reinvested and the rest consumed. When they reinvested capital, Latin Americans did not stop to think: What fraction of the national income am I going to lay my hands on, and how is my rate of return going to compare with the rate of growth of the economy? Instead they risked their wealth in all sorts of ventures expecting to earn more than the cost of capital. The spurt of new businesses in the outskirts of Latin America�s main cities opened by the children of poor rural immigrants attests to this.

Exactly what the value of the capital they own is depends on the expected future returns discounted by the prevailing long-term interest rate. What is clear is that, where there were once a few fat cats and a mass of poor people, there is now the product of social mobility. Exactly as happened in the developed world after (relatively) free markets were allowed to do their job in the past couple of centuries.

There's also an article that focuses on Asia here.

My impression is that these are free market economists and experts who aren't pleased with some of Piketty's suggestions about their economic views and have been using the emerging markets elsewhere to disprove his assertion about the growing prevalence of income inequality under a relatively free market. Is that perception changing? Is that even the right question to ask?

# ? Nov 18, 2015 21:40

Ardennes: May 12, 2002

Dreylad posted:

I know very little about economics so I wont try to comment intelligently. But I did notice that after Piketty's Capital In the Twenty-First Century came out, that a number of articles came out arguing that the emerging markets in South America and Asia countered PIketty's argument that there was growing inequality because of the changing value of labour and capital. For example:

There's also an article that focuses on Asia here.

My impression is that these are free market economists and experts who aren't pleased with some of Piketty's suggestions about their economic views and have been using the emerging markets elsewhere to disprove his assertion about the growing prevalence of income inequality under a relatively free market. Is that perception changing? Is that even the right question to ask?

One of the reasons Piketty has shaken up classical economists so much is that he more or less proves there is a dramatic problem with inequality using more or less neo-classical methods. The funny thing though he completely dismisses Marx in a rather formulaic manner at the same time. It is sort of a weird situation when at least some elements of Capital are at least supported by data from a neo-classist who also seems to not really grasp Marx beyond pretty very swallow critics.

"The devil is completely unknowable and wrong, but here is some data that says he is kind of right."

# ? Nov 18, 2015 22:40

asdf32: May 15, 2010; I lust for childrens' deaths. Ask me about how I don't care if my kids die.

Dreylad posted:

I know very little about economics so I wont try to comment intelligently. But I did notice that after Piketty's Capital In the Twenty-First Century came out, that a number of articles came out arguing that the emerging markets in South America and Asia countered PIketty's argument that there was growing inequality because of the changing value of labour and capital. For example:

There's also an article that focuses on Asia here.

My impression is that these are free market economists and experts who aren't pleased with some of Piketty's suggestions about their economic views and have been using the emerging markets elsewhere to disprove his assertion about the growing prevalence of income inequality under a relatively free market. Is that perception changing? Is that even the right question to ask?

Please note the thesis Helsing is suggesting is not really compatible with Piketty (nor is Marx).

Piketty's thesis is that rate of return on capital is comparatively high and destined to stay that way. The proposal in this thread is largely the opposite.

Ardennes posted:

I think the key difference though (from their perspective) they see this largely as situational and/or the result of incompetence rather than a systemic problem with actual economic structure.

Yes and for pretty good reason given history.

# ? Nov 19, 2015 01:52

WorldsStongestNerd: Apr 28, 2010; by Fluffdaddy

Capitalism has had one crisis after another in a fairly predictable fashion for centuries now. Even if a person really believed that the cause is incompetence and not systemic, by now they should see that incompetence or mismanagement is part of the system. The complaint that "capitalism works fine, your're just doing it wrong" sounds a lot like the old complaint that communism would work if done correctly.

# ? Nov 19, 2015 18:02

asdf32: May 15, 2010; I lust for childrens' deaths. Ask me about how I don't care if my kids die.

WorldsStrongestNerd posted:

Capitalism has had one crisis after another in a fairly predictable fashion for centuries now. Even if a person really believed that the cause is incompetence and not systemic, by now they should see that incompetence or mismanagement is part of the system. The complaint that "capitalism works fine, your're just doing it wrong" sounds a lot like the old complaint that communism would work if done correctly.

Well this thread is based on the claim that the next one is going to be different.

I think the main challenge, in light of what you correctly point out (crisis and bubbles for centuries), is to explain why.

# ? Nov 19, 2015 20:47

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Ardennes posted:

I think the key difference though (from their perspective) they see this largely as situational and/or the result of incompetence rather than a systemic problem with actual economic structure. They have to refuse any overarching explanation for what is happening because then they are practically critiquing capitalism itself.

That said, I think there is a broader story that isn't necessarily only economic in nature but political and historical and reliant on not only key economic assumptions but very clear political choices made after the Second World War. Not only austerity and triangulation, but the structure of international trade as well as the building of Cold War alliances.

I agree with you, but I'm curious about whether you'd be willing to elaborate?

Bob le Moche posted:

I don't know if it's that surprising that investors themselves come to similar conclusions as Marxist economic theorists do. Many of the ways in which "orthodox" economics typically diverge from marxian analyses have, I would say, more to do with the political role of the discipline in shaping state policy for the benefit of shareholders, or in reassuring the public that the job creators know what they're doing and everything's going to be fine. In terms of investors themselves actually trying to figure out where to put their capital and understanding the economy rationally, it makes sense to me that the analysis would converge.

Part of why this interests me is because some of these debates also track theoretical disagreements within the contemporary left. Right now, for instance, we have a fairly substantial disagreement between those, such as David Harvey or David McNally, who argue that the neoliberal period under Thatcher and Regan saw a restoration of the (Marxist) rate of profit, but with the result that the economy became increasingly financialized and labour's share of GDP was decreased. According to adherents of this analysis the result has been to create a persistent instability in the system, in which consumer credit has had to replace rising wages as the primary way to generate demand for consumer products.

On the other hand you have guys like Andrew Kliman who argue that the (Marxist) rate of profit never recovered from the 1970s crisis, and that the underlying cause of the crisis is a low rate of profit rather than financialization or low demand.

There's a related discussion, in which the left is also divided, about the extent to which capitalist advocates of austerity are rationally defending their class interests vs. irraitonally threatening their own future profits through the immiseration or the working class and setting the stage for further rounds of crisis.

I feel like following debates within the business press and mainstream economics can help provide context on these internal debates within the left.

WorldsStrongestNerd posted:

Capitalism has had one crisis after another in a fairly predictable fashion for centuries now. Even if a person really believed that the cause is incompetence and not systemic, by now they should see that incompetence or mismanagement is part of the system. The complaint that "capitalism works fine, your're just doing it wrong" sounds a lot like the old complaint that communism would work if done correctly.

So far as I can tell based on previous debates and arguments with him asdf32 adheres (whether consciously or not) to some variation of Say's Law, and thinks that in the long run a capitalist economy necessarily and inevitably achieves full capacity utilization. As long as there are skilled people and usable plant and equipment, his reasoning seems to go, the economy will grow at full potential and persistent shortfalls or mismatches between supply and demand caused by, say, lack of purchasing power or a dearth of profitable investments, are impossible or so unlikely as to be effectively impossible.

asdf32 posted:

Well this thread is based on the claim that the next one is going to be different.

Can you explain why you think this?

# ? Nov 19, 2015 23:06

Ardennes: May 12, 2002

Helsing posted:

I agree with you, but I'm curious about whether you'd be willing to elaborate?

It is quite evident that crises in capitalism have happened before, and yet it is still here but there is a clear historical relevance to why a "final crisis" was avoided and this is usually the result of some form of reformism or the result of localized nature of a crisis.

During the late 19th century/early 20th century there were the progressive reforms, during the Great Depression there were more reforms and of course after the Second World World there were even more especially in the West in the guise of liberal democracy . During the Great Depression and the Second World War, there was most likely a political motive, especially the threat of Marxist-Leninism and during the "progressive" era there was the early threat of socialism/anarchism/unionism.

However, we ultimately very may well live in a different era than those crises, specifically because there simply is not a robust left to act as a challenge to liberalism and therefore force reformism as a compromise solution that ultimately kept the system running. If anything world leaders seem to have doubled then tripled down on a non-reformist course for the most part. In addition, the structure of capitalism is even more interconnected than it was during the nineteenth-century/twentieth-century and there has been a broad shift of using globalization as a global wage suppressor that in many ways was not possible earlier. Of course, also the world is simply far more industrialized/post-industrialized than before at the same time.

More clearly, we are on untested ground here, never has liberalism since the mid 19th century have liberals felt more confident and yet the world is far different than it was there and is far more interconnected and in many ways brittle. There seems to be little room for compromise yet far more at stake.

# ? Nov 20, 2015 09:29

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Ardennes posted:

It is quite evident that crises in capitalism have happened before, and yet it is still here but there is a clear historical relevance to why a "final crisis" was avoided and this is usually the result of some form of reformism or the result of localized nature of a crisis.

During the late 19th century/early 20th century there were the progressive reforms, during the Great Depression there were more reforms and of course after the Second World World there were even more especially in the West in the guise of liberal democracy . During the Great Depression and the Second World War, there was most likely a political motive, especially the threat of Marxist-Leninism and during the "progressive" era there was the early threat of socialism/anarchism/unionism.

However, we ultimately very may well live in a different era than those crises, specifically because there simply is not a robust left to act as a challenge to liberalism and therefore force reformism as a compromise solution that ultimately kept the system running. If anything world leaders seem to have doubled then tripled down on a non-reformist course for the most part. In addition, the structure of capitalism is even more interconnected than it was during the nineteenth-century/twentieth-century and there has been a broad shift of using globalization as a global wage suppressor that in many ways was not possible earlier. Of course, also the world is simply far more industrialized/post-industrialized than before at the same time.

More clearly, we are on untested ground here, never has liberalism since the mid 19th century have liberals felt more confident and yet the world is far different than it was there and is far more interconnected and in many ways brittle. There seems to be little room for compromise yet far more at stake.

Interestingly enough it seems as though certain "emerging markets" have also been perceived as providing an alternative model to liberalism, in which neoliberal economic policies of corporate boosterism and pro-corporate dirigiste policies are welded toward an appeal to national chauvinism and "traditional values". To varying extents we can see China, Turkey and Russia, among others, charting this kind of course.

quote:

Hungarian Prime Minister Viktor Orban said he wants to abandon liberal democracy in favor of an �illiberal state,� citing Russia and Turkey as examples.
The global financial crisis in 2008 showed that �liberal democratic states can�t remain globally competitive,� Orban said on July 26 at a retreat of ethnic Hungarian leaders in Baile Tusnad, Romania.

�I don�t think that our European Union membership precludes us from building an illiberal new state based on national foundations,� Orban said, according to the video of his speech on the government�s website. He listed Russia, Turkey and China as examples of �successful� nations, �none of which is liberal and some of which aren�t even democracies.�

Orban, who was re-elected in April for a second consecutive four-year term, has clashed with the EU as he amassed more power than any of his predecessors since the fall of the Iron Curtain in 1989, replacing the heads of independent institutions including the courts with allies, tightening control over media and changing election rules to help him retain a constitutional majority in Parliament.

Orban, a former self-described liberal, anti-communist student leader in the 1980s, has championed relations with Russian President Vladimir Putin and the leaders of China, Azerbaijan and Kazakhstan since 2010 to boost trade.

quote:

MOSCOW � At the height of the Cold War, it was common for American conservatives to label the officially atheist Soviet Union a �godless nation.�

More than two decades on, history has come full circle, as the Kremlin and its allies in the Russian Orthodox Church hurl the same allegation at the West.

�Many Euro-Atlantic countries have moved away from their roots, including Christian values,� Russian President Vladimir Putin said in a recent keynote speech. �Policies are being pursued that place on the same level a multi-child family and a same-sex partnership, a faith in God and a belief in Satan. This is the path to degradation.�

n his state of the nation address in mid-December, Mr. Putin also portrayed Russia as a staunch defender of �traditional values� against what he depicted as the morally bankrupt West. Social and religious conservatism, the former KGB officer insisted, is the only way to prevent the world from slipping into �chaotic darkness.�

As part of this defense of �Christian values,� Russia has adopted a law banning �homosexual propaganda� and another that makes it a criminal offense to �insult� the religious sensibilities of believers.

The law on religious sensibilities was adopted in the wake of a protest in Moscow�s largest cathedral by a female punk rock group against the Orthodox Church�s support of Mr. Putin. Kremlin-run television said the group�s �demonic� protest was funded by �some Americans.�

It will be interesting to see whether any of these regimes can respond effectively to a crisis in emerging markets - or to another generalized global downtown - or whether these hybrid regimes were just a temporary byproduct of an emerging markets' bubble. Either way, I think the statements and behaviors of these groups lends credence to your claim that the liberal global system is more fragile than it appears.

# ? Nov 20, 2015 15:26

Ardennes: May 12, 2002

Helsing posted:

Interestingly enough it seems as though certain "emerging markets" have also been perceived as providing an alternative model to liberalism, in which neoliberal economic policies of corporate boosterism and pro-corporate dirigiste policies are welded toward an appeal to national chauvinism and "traditional values". To varying extents we can see China, Turkey and Russia, among others, charting this kind of course.

It will be interesting to see whether any of these regimes can respond effectively to a crisis in emerging markets - or to another generalized global downtown - or whether these hybrid regimes were just a temporary byproduct of an emerging markets' bubble. Either way, I think the statements and behaviors of these groups lends credence to your claim that the liberal global system is more fragile than it appears.

I see more as compensation of liberal social values (which by and large the public in those countries are often indifferent to) in return for hopeful state stability and the continuation of liberal economic values. They are simply are farther along the "authoritarian curve" than Western states but many of the same politics match up pretty closely (especially in the last few years). Look at Poland for the latest example of a "model" liberal state following this course.

However, while this turn to the authoritarian right socially may distract people for a while there is the bigger question of economics, and that these regimes are still not in essence moving forward with any meaningful type of reformism. They are doubling down on the same programs but with a new packaging. Populism and nationalism can buy time, but there is the ultimate question still of where middle income states/emerging markets can go beyond struggle to stay afloat.

For the West, populism is rapidly growing stronger and yet there is still no appetite to reverse any economic course.

Ardennes fucked around with this message at 16:15 on Nov 20, 2015

# ? Nov 20, 2015 15:57

icantfindaname: Jul 1, 2008

Ardennes posted:

It is quite evident that crises in capitalism have happened before, and yet it is still here but there is a clear historical relevance to why a "final crisis" was avoided and this is usually the result of some form of reformism or the result of localized nature of a crisis.

During the late 19th century/early 20th century there were the progressive reforms, during the Great Depression there were more reforms and of course after the Second World World there were even more especially in the West in the guise of liberal democracy . During the Great Depression and the Second World War, there was most likely a political motive, especially the threat of Marxist-Leninism and during the "progressive" era there was the early threat of socialism/anarchism/unionism.

However, we ultimately very may well live in a different era than those crises, specifically because there simply is not a robust left to act as a challenge to liberalism and therefore force reformism as a compromise solution that ultimately kept the system running. If anything world leaders seem to have doubled then tripled down on a non-reformist course for the most part. In addition, the structure of capitalism is even more interconnected than it was during the nineteenth-century/twentieth-century and there has been a broad shift of using globalization as a global wage suppressor that in many ways was not possible earlier. Of course, also the world is simply far more industrialized/post-industrialized than before at the same time.

More clearly, we are on untested ground here, never has liberalism since the mid 19th century have liberals felt more confident and yet the world is far different than it was there and is far more interconnected and in many ways brittle. There seems to be little room for compromise yet far more at stake.

I think the far right was a more potent influence on liberalism to reform itself than the left. People complain about the sad state of the left today, but was it ever a potent force outside of, to speak perfectly frankly, freak historical accidents/exceptions like the USSR? I think you're giving liberalism too little credit for reforming itself in response to the far right, and too much credit to a far left that doesn't really deserve it IMO

icantfindaname fucked around with this message at 03:51 on Nov 21, 2015

# ? Nov 21, 2015 03:46

V. Illych L.: Apr 11, 2008; ASK ME ABOUT LUMBER

icantfindaname posted:

I think the far right was a more potent influence on liberalism to reform itself than the left. People complain about the sad state of the left today, but was it ever a potent force outside of, to speak perfectly frankly, freak historical accidents/exceptions like the USSR? I think you're giving liberalism too little credit for reforming itself in response to the far right, and too much credit to a far left that doesn't really deserve it IMO

# ? Nov 21, 2015 05:45

icantfindaname: Jul 1, 2008

bite me commies. leftist revolution was never a real danger in US or in Western Europe, so ascribing any reforms to fear of it makes no sense

# ? Nov 21, 2015 07:44

Venomous: Nov 7, 2011

icantfindaname posted:

bite me commies. leftist revolution was never a real danger in US or in Western Europe, so ascribing any reforms to fear of it makes no sense

counterpoint: the New Deal saved the US from the Depression and prevented communist revolution by satisfying the American working class in the long run

I don't see how the far right had anything to do with that

# ? Nov 21, 2015 10:36

Rodatose: Jul 8, 2008; corn, corn, corn

icantfindaname posted:

bite me commies. leftist revolution was never a real danger in US or in Western Europe, so ascribing any reforms to fear of it makes no sense

My US history book goes from chapter 14: The Civil War and Reconstruction to chapter 15: World War One. Kinda just mumbles '8 hour working day' and something about immigrants in a page between.

e: a less sarcastic/more clear reply:
There was a whole Thing that happened after the industrial revolutions in Europe and the US involving trade unionism, anarchism, democratic socialism and revolutionary socialism in reaction to the intolerable conditions of those times; those efforts serve as the basis for a lot of the protections we have now. This is often glossed over in basic US history textbooks, and someone who relies too heavily on only the basic history laid out for them in primary school without supplementing it with other readings of history will miss that. You come off as that kind of person here and I think I've said something to you before in regard to making assertions that sound too boldly confident when paired with what you actually know about economic history.

Politicians of those times were often clear in their intentions that they viewed those leftist blocs as the reason to enact reforms, not the right wing - mostly because the populist nationalism as a galvanizing force which acted as an existential threat to the state that you speak of started springing up with WWI, which was partly a result of nation-states trying to counter class consciousness with patriotic/nationalist consciousness. The progressive Milwaukee Journal summed up pretty well that conservatives "fight socialism blindly, while the Progressives fight it intelligently and seek to remedy the abuses and conditions upon which it thrives." And Theodore Roosevelt said in regard to progressive era legislation: "I think [railroad lobbyists] are very shortsighted not to understand that to beat [antitrust acts] means to increase the movement for government ownership of the railroads." Or expressing concern that workers compensation laws being ruled unconstitutional will serve "immensely to the strength of the Socialist Party."

tl;dr: various strains of leftism were very strong for a while there (during a good stretch of modern history which is mostly left out of standard US history books). The modern situation is much different, with stronger organized right wing elements and an almost non-existent organized left. It's not helpful to assume current conditions for all of history.

Rodatose fucked around with this message at 12:07 on Nov 21, 2015

# ? Nov 21, 2015 10:45

Ardennes: May 12, 2002

icantfindaname posted:

bite me commies. leftist revolution was never a real danger in US or in Western Europe, so ascribing any reforms to fear of it makes no sense

Eh remember there was a failed communist uprising in Bavaria, Hungary was briefly independently communist and Western governments were getting pretty nervous when they saw Soviet forces moving toward Warsaw back in the 1921 and that is just around World War One. Oh yeah, and there was that whole" Cold War" thing as well, including the growth and success of communist/non-social democratic leftist parties in Western Europe.

From 1917 to the 1970s, there was actually something to be nervous about (of course before then too as well).

Liberalism was forced to reformist because there was actually a real political threat inside and outside the borders of Western countries and their empires. The West obviously always had the upper hand but that doesn't mean there was a real challenge they had to face.

As far as the far right, Mussolini and Hitler never had such long-standing influence, and anyway it doesn't make sense in the context of the development of post-war welfare states.

# ? Nov 21, 2015 12:09

Bob le Moche: Jul 10, 2011; I AM A HORRIBLE TANKIE MORON
WHO LONGS TO SUCK CHAVISTA COCK !

I SUGGEST YOU IGNORE ANY POSTS MADE BY THIS PERSON ABOUT VENEZUELA, POLITICS, OR ANYTHING ACTUALLY !

(This title paid for by money stolen from PDVSA)

yeah it's not like the history of government reforms and social movements is this secret mystery that you get to make poo poo up about, like you can just look it up

# ? Nov 21, 2015 15:55

Vermain: Sep 5, 2006

Helsing posted:

Unfortunately that link is broken for me. Is there any chance you can re-link the article?

Here's the article. Michael Roberts has done a nice series of articles investigating the continuing sluggishness of the global economy (as a consequence of a low rate of profit), and I'd encourage taking a read through his blog to evaluate his evidence and arguments. He actually posted a new article today about the possibility of a new recession next year if there is indeed a rate hike in the U.S.

# ? Nov 21, 2015 16:21

V. Illych L.: Apr 11, 2008; ASK ME ABOUT LUMBER

icantfindaname posted:

bite me commies. leftist revolution was never a real danger in US or in Western Europe, so ascribing any reforms to fear of it makes no sense

1848 1871 1914 1918 1919 1922 1936 1968

this all being strictly confining oneself to europe, of course, and leaving out a number of other incidents

did you know that bismarck explicitly designed his welfare programmes to undercut the popularity of the marxist SPD and prevent a revolution

and, i mean, this is ignoring militancy in the form of industrial actions &c and assuming the victories of the reformist labour movement to be a facet of the "far-right" or w/e which is even more staggeringly ignorant than whatever ill-conceived point you're trying to formulate here

V. Illych L. fucked around with this message at 17:10 on Nov 21, 2015

# ? Nov 21, 2015 17:05

Ardennes: May 12, 2002

V. Illych L. posted:

1848 1871 1914 1918 1919 1922 1936

this all being strictly confining oneself to europe, of course, and leaving out a number of other incidents

did you know that bismarck explicitly designed his welfare programmes to undercut the popularity of the marxist SPD and prevent a revolution

and, i mean, this is ignoring militancy in the form of industrial actions &c and assuming the victories of the reformist labour movement to be a facet of the "far-right" or w/e which is even more staggeringly ignorant than whatever ill-conceived point you're trying to formulate here

As to be clear, it isn't just revolution on it's own that was the issue but also broader geopolitics especially after 1917, especially the constant fear that leftist parties were allies or would ally themselves with Moscow. They way to defeat them was simply give most of what people wanted in the first place. That said, the "victory" of the Cold War wasn't just against the Soviets but against socialism as a concept so it many ways it is a battle that could have easily said to go from 1848 to 1991. It is just 1917 to 1991 was the main phase of the struggle because there was a great power contest that went a long with it.

That said, we no longer live in that era and even compared to the mid-19th century leftism is at a very low ebb and liberalism is nearly completely ascendant, and ideologically hardened.

# ? Nov 21, 2015 17:16

icantfindaname: Jul 1, 2008

V. Illych L. posted:

1848 1871 1914 1918 1919 1922 1936 1968

this all being strictly confining oneself to europe, of course, and leaving out a number of other incidents

did you know that bismarck explicitly designed his welfare programmes to undercut the popularity of the marxist SPD and prevent a revolution

and, i mean, this is ignoring militancy in the form of industrial actions &c and assuming the victories of the reformist labour movement to be a facet of the "far-right" or w/e which is even more staggeringly ignorant than whatever ill-conceived point you're trying to formulate here

a big long string of failed revolutions (besides one) that got the poo poo stomped out of them: proof that the left is responsible for all victories of reformist liberalism

# ? Nov 21, 2015 22:47

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Most historians agree that there was significant unease in Western governments about the prospect of a socialist uprising. If you want to argue otherwise then that's great but could you actually cite historical examples, correspondances between political leaders, etc. to make your case instead of this low effort garbage posting? There are a million other threads for you to poo poo up if you don't want to make effort posts.

# ? Nov 21, 2015 23:30

Mia Wasikowska: Oct 7, 2006

icantfindaname posted:

a big long string of failed revolutions (besides one) that got the poo poo stomped out of them: proof that the left is responsible for all victories of reformist liberalism

meanwhile your argument that reaction to the right being responsible for reform rests on??

# ? Nov 22, 2015 00:11

icantfindaname: Jul 1, 2008

Zas posted:

meanwhile your argument that reaction to the right being responsible for reform rests on??

If the argument is just based on fear/likelihood of the far left / far right coming to power, the far right actually came to power much more often than the left did. The actual takeaway IMO is that it's not at all clear that far left agitation is what drove liberal reformism, at least not to the degree pushed by a lot of people

# ? Nov 22, 2015 00:55

Mia Wasikowska: Oct 7, 2006

That's not really the basis of the argument, the argument is that a lot of the architects of various welfare states and programs straight up have said "We're doing this to hold off/undermine socialism/communism." Now I could see a counterargument that they were lying or just as strongly influenced by the right, but you'd have to make it.

# ? Nov 22, 2015 01:02

Helsing: Aug 23, 2003; DON'T POST IN THE ELECTION THREAD UNLESS YOU JOE BIDEN

Icantfindaname, what you're over looking -- in addition to the points raised by Zas -- is that many of the right wing regimes you're referring to came into power as a direct reaction to the threat of socialism. Even before Mussolini came to power in Italy his fascist brown shirts had ingratiated themselves with the establishment by breaking strikes and beating or murdering socialist leaders in regions such as the Po valley. In Germany Hitler was invited into the government by the ruling Nationalist party and given substantial economic assistance from industrialists specifically because of the growing strength of the German communist party and anxiety over both the existence of the USSR and the failed German revolution in 1918-1919.

After World War II it's true that the Keynesian system of demand management was justified in part on the belief that it would dampen the risk of political extremism from both the left and the right but you're displaying a lot of confusion over the sequence of historical events as well as the very real and widely expressed concerns of the establishment during the late 19th up to the mid 20th century about the prospects of a socialist uprising, or at least highly disruptive industrial actions.

Ardennes posted:

I see more as compensation of liberal social values (which by and large the public in those countries are often indifferent to) in return for hopeful state stability and the continuation of liberal economic values. They are simply are farther along the "authoritarian curve" than Western states but many of the same politics match up pretty closely (especially in the last few years). Look at Poland for the latest example of a "model" liberal state following this course.

However, while this turn to the authoritarian right socially may distract people for a while there is the bigger question of economics, and that these regimes are still not in essence moving forward with any meaningful type of reformism. They are doubling down on the same programs but with a new packaging. Populism and nationalism can buy time, but there is the ultimate question still of where middle income states/emerging markets can go beyond struggle to stay afloat.

For the West, populism is rapidly growing stronger and yet there is still no appetite to reverse any economic course.

I think that we've seen some very modest pressure toward reformism in the North America. Obamacare is a huge gift to insurance companies but it represent a neoliberal attempt to correct a market failure in the healthcare industry, and in Canada we've seen Liberal governments (and in rare cases parties with a vaguely social democratic flavouring) replacing conservative parties, in part by promising tax increases on the wealthy and deficit financed infrastructure spending, government run pension plans and limits on carbon emissions. Of course all these measures were mainstream a generation ago, and it's unlikely these measures will be enacted on a sufficient scale to respond effectively to the scale of the economic malaise that seems to be settling over the globe, but I see them as cracks in the neoliberal monolith.

As for the organized left, I think that the financial crisis and the incoherence of the Occupy Wall Street movement (at least at the national level) represent a sort of nadir for the left, a real and depressing example of how weak and irrelevant the left had become. Since then, however, I think we've seen some sporadic examples of grass roots mobilization that might yet bear fruit in he coming decades.

The real question is whether local eruptions like Black Lives Matter, Fight For 15, the Bernie Sanders campaign, etc. can actually link together into some kind of organic coalition. Much in the way that the fight against segregation, opposition to Vietnam and various other left wing causes in the 1960s built upon and accelerated each other, pulling many liberals to the left in the process. We're not at that stage yet but we many eventually arrive there.

As for the ruse of conservative anti-liberal regimes in emerging markets, I wonder where some if them won't be able to use their authoritarian political structures to pivot toward some kind of reformism more rapidly than liberal governments, much in the way that fascist governments were able to implement public works projects and targeted economic relief without generating the kind of conservative and corporate backlash that was triggered by the New Deal.

My point here being that the situation seems quite fluid and while the lack of anticapitalist states internationally and socialist movements domestically may reduce the pressure toward reformism, that doesn't necessarily mean that some kind of rupture won't form within the coalition of forces upholding the current neoliberal orthodoxy. If nothing else, we might see the looming threat of global warming getting used as justification for a huge economic reordering of society.

# ? Nov 22, 2015 23:08

V. Illych L.: Apr 11, 2008; ASK ME ABOUT LUMBER

icantfindaname posted:

If the argument is just based on fear/likelihood of the far left / far right coming to power, the far right actually came to power much more often than the left did. The actual takeaway IMO is that it's not at all clear that far left agitation is what drove liberal reformism, at least not to the degree pushed by a lot of people

icantfindaname posted:

I think the far right was a more potent influence on liberalism to reform itself than the left. People complain about the sad state of the left today, but was it ever a potent force outside of, to speak perfectly frankly, freak historical accidents/exceptions like the USSR? I think you're giving liberalism too little credit for reforming itself in response to the far right, and too much credit to a far left that doesn't really deserve it IMO

these statements are not mutually coherent. which of them bests sums up your position

e. i mean, this is not a matter of opinion. the historical record just doesn't bear out your point of view - the ruling classes explicitly, rightly or wrongly, feared a left-wing revolution, and this created a space to work for the more reformist left. if you want to make a counter-argument to this view you cannot simply say "BUT WHAT IF THE FASCISTS WERE THE REAL HEROES ALL ALONG" and expect to get away with it

# ? Nov 22, 2015 23:16

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# ? Apr 26, 2024 07:46

Fojar38: Sep 2, 2011; Sorry I meant to say I hope that the police use maximum force and kill or maim a bunch of innocent people, thus paving a way for a proletarian uprising and socialist utopia

also here's a stupid take
---------------------------->

quote:

As for the ruse of conservative anti-liberal regimes in emerging markets, I wonder where some if them won't be able to use their authoritarian political structures to pivot toward some kind of reformism more rapidly than liberal governments, much in the way that fascist governments were able to implement public works projects and targeted economic relief without generating the kind of conservative and corporate backlash that was triggered by the New Deal.

What incentive do authoritarian regimes have to use their unchecked power to commit to reform? Particularly when reforms would involve them giving up some power?

# ? Nov 23, 2015 00:09

The Something Awful Forums > Discussion > Debate & Discussion > Is an "Emerging Markets" debt crisis imminent?

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