On Charlie Hebdo

It is with a heavy heart that I write, as this week doubtless stands as one of the most difficult in recent memory. The tragic attack on the offices of Charlie Hebdo are indefensible, and the threat that such an attack poses on the values of Western Europe is truly frightening.

Make no mistake- the point of this post is not to spread some sort of obscene, hate-filled garbage under the guise of freedom of expression. Quite the contrary. Indeed, as pointed out in articles by Gawker and David Brooks, the history of Charlie Hebdo seems to shield some interesting closet-skeletons. Again, the point of this post is not to criticize the victims of an attack for saying something they should not have said. Many of the articles written during the fallout of the Charlie Hebdo attack make a decent point- quite a lot of their material (albeit decontextualized, poorly translated and ignoring the juvenile streak present in much French comedy) seems deliberately inflammatory. But as soon as we start trying to separate the world into spheres of ‘what should be said’ and ‘what shouldn’t be said,’ we approach a situation in which this sort of psychological censorship can be applied to silencing critique of our own nations and governments. This censorship, especially in the context of a militarized police force, surveillance and torture does not fill me with confidence, and represents the erosion of vital cultural values on which the West was built.

In the past few decades since Islamic fundamentalism has become a force to be reckoned with, we have been fed the narrative that these radical terrorist attacks will serve to cripple and destabilize the West. Not only does this fear serve as a further defense of the authoritarian creep, it is also fundamentally wrong. Terrorist attacks in the West are tragic and indefensible, but radical Islamist violence poses a far more immediate physical threat to other Muslims– residents of Muslim countries- than it does in the West. The threat to the West is far more pressing in the aftermath of the domestic terrorist attack than it is in the moment the bomb goes off.

When we mistake individual, peaceful Muslims for terrorists- when we seek to generalize and categorize without subtlety or realism- we commit several sins. The first and most visible is, obviously, the sin of racism, which is ironic, as Muslims are not a race. While stemming racism should be the most pressing reason to stop these generalizations, we all know that racism is wrong, and to debate that fact further implies that there is anything left to debate. There isn’t. Racism is wrong and we shouldn’t do it.

The subtler sin in engaging in senseless generalization is the narrative it creates. When we assume all Muslims to be terrorists, we create a narrative in which a monolithic West stands in opposition to a monolithic Islam- a dated and frankly idiotic us vs. them mentality. The irony here lies in the fact that radical Muslim clerics want nothing more than to be accepted as the unquestioned representatives of Islam, to the exception of more sensible, moderate interpretations. Even more ironic is that the exact same binary narrative is pushed by the radical right in Western countries, with only the protagonists of the story and their goals switched. Ultra-conservatism on both sides serve the same purpose- to wear away at the already precarious pool of Western values on which we have to draw. It is thus incumbent on us- the value-driven, peaceful people who make up the overwhelming majority of people in our world- to resist the crypto-fascist creep that imperils our world.

It would be marginally acceptable if this were the first time we failed so tremendously to do the mature thing when faced with the prospect of Islamist terrorism. But we- and by we, I mean the most powerful Western governments- have been consistent in our failure to deal adequately with Islamist terrorism throughout our attempts to do so. Icing on the cake: it probably wouldn’t have ever become a political force in the first place if it weren’t for us.

The first groups to espoused an Islamic fundamentalist ideology- Egypt’s Muslim Brotherhood and Iran’s Fedayan-e-Islam (lest we forget, there is nothing ancient about Islamic fundamentalism, it is purely a 20th century development) arose as a result of hostility toward Western colonialism and Mohammad Reza Shah’s pro-Western regime. Throughout the mid-20th century, the West consistently turned a blind eye to Islamic fundamentalism, under the assumption that it was preferable to Marxism-Leninism. Famously, for the same reason, the US and the UK largely downplayed the hostility of Ayatollah Khomeini’s fundamentalists until they entered power and their true colors were shown. President Reagan then proceeded to fund the Iranian fundamentalists against Iraq, and the Afghan fundamentalists- the forebears of the Taliban- against the Soviets. And, finally, when the various alliances of convenience ended, and they ‘turned against us,’ we responded by buying their divisive propaganda and adding our own propaganda to it, gutting civil liberties of our own people (Muslim or otherwise) and beginning a campaign of persistent, unceasing warfare.

Yes, Islamic fundamentalism is, at its heart, a death cult with little respect for anyone, Muslim or otherwise. But when we witness an act as horrific as what we saw on Wednesday, we cannot ignore that we did precious little to hold the responsible actors and figures within our own countries to task. We cannot ever forgive those with blood on their hands- whether they wear breads and robes or impeccably tailored suits.

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An American Dilemma

Many of us (i.e., white Americans) are surprised by the recent and not-so-recent events in Ferguson. To many white people, the recurrence of such stark racial issues reeks of a time forty or fifty years past, irrelevant to a so-called post-racial America. What many of us don’t realize is that very few people outside white America- whether American minorities or people outside the US looking in- are surprised. Firstly, our memories tend to be shorter than the memories of people living in other countries. The LA riots were barely twenty years ago. Those with power tend to write the history books, and, as such, we have been very successful in ensuring that any obvious signs of racial inequality are relegated to dusty corners of the history books. Secondly, I learned US history once outside the US and once inside, and I can vouch for the graphic, brutal horror with which America’s racial narrative is taught overseas. It is simply not taught in the same way here in America. This is not to say that people in other countries are not racist. But the racism of people in other countries generally resembles tribalism or xenophobia more than the systemic societal schisms were see here. The American form of racism (much like baconnaise or deep-fried Coke) is a unique and terrible thing.

With the possible exception of Brazil, in no other post-Enlightenment country were labor and capital ever divided cleanly along racial lines. In no other post-Industrial Revolution society did labor ever own zero wealth and resources. Nowhere else in the world was national unity ever challenged and redefined by the right to own other human beings. In no country were slaves ever literally half the population, as they were in the US at the peak (trough?) of slavery as an institution. Nowhere else did it take a hundred years to ‘clean up the law books’ (read: establish a series of marginally less unequal equilibria) after slavery ended. I could go on, but I think I’ve made my point: there should be small wonder we’re still struggling with the idea of racial equality.

When people say things like ‘there’s still a lot of racism in this country,’ I can only think ‘no shit.’ There’s very little else in American history that rivals the centrality of the racial narrative as a driver of the American identity. The concept of individualism may come close, but, lest we forget, the right to own slaves was itself for years couched in the language of individual rights. It was varying opinions on this racial divide that formed the biggest challenge to the American identity in its formative years, and it wasn’t until that schism came to a head and quite literally tore the country apart that the identity of the country coalesced into something remotely unified. White Americans- even white liberals- don’t want to hear any of this. We want to be in charge of opening and closing the debate on race. We want to define when racial America ends and post-racial America begins. Realistically, we can’t do that. The debate has been open for well over four hundred years, and we can’t close it unless we discuss our own failings as a society. Until then, there will only be more Fergusons to come.

Why Doesn’t Anything Make Sense Anymore?

Often, we tend to forget that oil supply, and hence oil prices, are heavily influenced by cartels and political pressures as much (if not more so) than they are by the whims of commodity markets. The recent dip (or crash, depending on your degree of sensationalism) in oil prices seems to be an excellent example of the interconnectedness of global politics and economics, as well as the complexity of the political situation in the early 21st-century. It seems increasingly clear that the us vs. them mentality that got us through World War II and the Cold War no longer suffices, and that the survival of any one nation on the global arena depends on its ability to navigate the increasingly complex network of relations being built.

The consensus view on the recent oil price shock seems to be that it’s primarily the cause of Saudi Arabian manipulation. Specifically, the aim of this manipulation seems to be two-fold. Firstly, it is an attempt to control the effects of the shale oil boom that North Dakota is currently undergoing. It’s fundamentally a question of price elasticity of supply- Saudi Arabia knows that it has more than enough oil such that a downward shift in price will not hugely impact its coffers. The amount of extant shale oil, however, is much lower, and a price shift could affect not only shale oil revenue, but also investment in the booming shale oil industry. This apparent Saudi hostility to US interests is not new- the relationship between the Saudis and the US has always been a rather vitriolic alliance of convenience, at best; simmering hostility at worst.

The second goal of this price manipulations seems to be targeted toward Russia and Iran who, as large oil producers, effectively depend of oil revenues for balanced budgets and (broadly) functioning economies. Russia and Iran’s fingers in Syria, specifically their support for the regime of Bashar al-Assad, are a threat to the Saudi’s regional dominance, and weakening these two states may well serve as a decisive shift in the conflict. This move, coming several months into a Western effort to stop the spread of ISIS, also lends some credence toward the “the Saudis are totally funding ISIS,” which has as yet gone “unproven.”

It’s fairly clear that the aim of the Saudis is a bipartite destabilization- finding the one political move they can make which would help to weaken both their neighbors to the North and their frienemies to the West. I have long been a critic of Saudi foreign policy- they have historically shown themselves to be far too willing to shake with one hand and backstab with the other. As such, the only sensible course of action given the Saudi’s latest move is to ensure that their plan backfires. Otherwise, the terrorists, quite literally, win.

The perennially unstable three-bloc system that pits the West against Russia-China-Iran against the Sunnis Middle East is inefficient, given that two of these blocs depend on the other for their energy needs, their budgetary health and their economic competitiveness. Similarly, although the Western bloc and the Russian bloc may differ in ideology, neither bloc would be opposed to a serious reigning-in of Islamic fervor around the world. Finally, while the current set up does not provide a sufficient bulwark against the rising tide of Islamism, the combined might of four of the world’s military forces might just do the job.

The problem here is that we’ve already gone down the rabbit hole far enough that the only way out, even if temporarily, is ratcheting up brinksmanship. I am fully aware that the suggestion I gave in the above paragraph is no solution at all. Fortunately, there is a genuine solution to this issue that is technically possible- to relegate energy policy to an independent, non-sovereign, international body- much as was attempted with capital policy as a result of Bretton Woods. Unfortunately, this solution is unlikely to be enacted until we’ve gone too far- human beings have a sad tendency not to see the writing on the wall. Even more unfortunately, this solution is far from perfect- nothing says “potential corruption” like “independent international body.”

Regardless of where we end up, it’s clear that “us vs them” is dead, buried and consummately rotting.

About Last Night

Now that the fog (or red mist, rather) has cleared, I’m beginning to piece together what exactly happened last night. All told, last night’s results were, I suppose, a mixed bag. Maybe that’s a good thing- after all, a functioning (or at least semi-functioning) democracy has less unity of purpose than a dictatorship, especially in a large, diverse country. So maybe we can take some solace in the fact that our democracy seems to be working. Similarly, the ‘midterm swing,’ a shift of confidence away from the President’s party, is a tried and true American tradition, although this was a swing of historic proportions- rightly worrisome to many progressives. But, lest we forget the silver linings, Cory Booker got elected in New Jersey, and my home state of Connecticut re-elected Dan Malloy, the best governor we’ve had in years. Cold comfort, though, given the number of utter whackjobs that did get elected. When is this right-wing populist obsession with ‘political outsiders’ gonna die? Who- or what, for that matter- are these people going to elect next? There is a worrying lack of historical information here: right-wing populism, especially when combined with a taste for political outsiders, rarely ends well. Hyperbolic? Sure. But, in the eternal words of Lisa Simpson, the price of democracy is eternal vigilance.

In addition to a lack of historical information, there seems to be an even more troubling gap in basic American civics. Voters, disturbed by a seemingly weak President and a do-nothing Congress, vote for the opposition. In the moment, isolated from any context, this makes sense. They assume this inaction stems from traits inherent to the President and his party, ignoring the institutional checks and balances we all apparently learned about in school. To them, the solution to an apparently milquetoast President being blocked at every juncture by the opposition party who controls the half the legislature is forcing the control of the whole legislature into their hands. The whole system of checks and balances was set up to prevent changes from taking place too quickly, and the slow pace of change in this country is, again, a sign that some aspects of our democracy are, unaccountably, still working the way they’re supposed to. Listen, if you guys want a dictator, I’m sure that can be arranged.

Bear in mind, for the handful of aspects of American democracy that are working, there’s a whole lot that aren’t. The Republicans lagged the Democrats by 1.1 million popular votes in the House election but swept a cool 34 seat majority. The article above pins this fact on politically partisan gerrymandering, and its not far from the mark. Throughout the country, most urban areas districts are crammed together, ensuring massive Democratic majorities, rather than blending urban, suburban and rural districts together to make district races in any way predictable. Some districts, such as the one I live in, don’t even field Republican candidates, and I’m sure there’s at least some rural districts out there that don’t field Democrats. One solution would be to redistrict the way we’re supposed to- through the use of politically independent census data. A better solution would be to scrap the first-past-the-post district system entirely and replace it with a proportional system which would not only allow for significantly better representation, but also a true, multi-party democracy. Imagine that- a Republican Party that isn’t held hostage by its most militant wing. We can always dream.

But what’s done is done. It’ll be a messy two years, but maybe- possibly- we’ll be in better shape for 2016. Probably not, though.

Hungary’s Immovable Object

First and foremost, I would like to congratulate Brazilian president Dilma Rousseff on her re-election. And to the cynics, all I have to offer are facts. Ten years under the Workers’ Party have rendered Brazil’s per-capita output and its middle class is larger than ever, and, while inflation may not be at the level of developed nations (about that…), it is now far more stable. The nation’s macroeconomic fundamentals are not perfect, sure. But they’re a far cry from the constant currency revaluations of the 80s and 90s. Best of luck, Dilma, and stay the course.

Now, to the point. Over 100,000 Hungarians have risen up in the past few days to protest Pres Viktor Orbán’s institution of an internet tax (which he apparently didn’t tell his MPs about). While an internet tax is itself a very poor policy idea, amounting to little more than a tax on the freedom of information, the tax itself is not the whole issue. Orbán and his party, Fidesz, have recently come under increasing international scrutiny due to their increasingly undemocratic practices. Orbán freely admitted in a speech earlier this year that the era of Western-style liberal democracy is ending, and that he aims to look eastward (i.e., to Russia and Turkey) to find a model for leadership. More so than a domestic protest on a bad policy idea, these protests seem to be a statement of dissatisfaction on the part of Hungarians (who, famously, aren’t known for taking things sitting down) directed at Orbán and the Fidesz government in general. In light of Orbán’s recent turn, the internet tax seems a lot more sinister.

Referring to Fidesz as “Orbán’s party” is reasonable and accurate. Budapest is increasingly dominated with pictures of Orbán’s face and his party’s unsettling slogan “Only Fidesz!” Orbán was a founding member of Fidesz, which originated shortly after the fall of Communism as a small, youth-oriented party with strong capitalist/pro-democracy leanings. Fidesz (with Orbán as its media-savvy representative) initially sought to ingrain democracy and further the spread of capitalism in Hungary, a nation that had always had a greater tolerance for free markets than the rest of the Soviet bloc as a result of its official policy of so-called Goulash Communism. Fidesz’s meteoric rise didn’t begin, however, until the mid-90s, when the party (now under Orbán’s full control) began incorporating elements of Hungarian nationalism and more populist economic policies. The party continued to grow throughout the 2000’s, but did not reach the stratospheric, supermajoritarian heights it now commands until after the Great Recession hit.

“Good story,” you might say. “But why does any of it matter?” Well, economist (and Hungarian) Karl Polanyi, who I seem to be plugging quite a lot on this blog, explains in his seminal work The Great Transformation that when people feel abandoned by the dominant socioeconomic systems, they seek alternatives. Nazism, for example, was born during Germany’s bout of hyperinflation, nearly died afterward, and was reborn after the Great Depression. In the early years of democracy, Hungarians embraced their new freedom wholeheartedly. But Hungary, despite being fundamentally in a much better position than many former Soviet bloc states, still suffered from the same destroyed expectations. They were faced with a global liberal democratic hegemony that had become increasingly dominated by financial markets, a development consensus that imposed upon them shock therapy, structural adjustment and flat taxes. In essence, they were more or less in the same, largely powerless position- largely ignored by the larger powers while they played war games in the Middle East. Presumably, it is this alienation that has made so many Hungarians vote for Fidesz, a party which espouses doctrines little removed from the Goulash Communism of old.

Hungary matters for the same reason Ukraine matters. It may not be as visible, but it is exactly Orbán sly, underhanded tactics that make him so dangerous. Many of us didn’t even hear about him until he’d already largely finished the job. Orbán and the rest of his ilk (i.e. Erdogan) are shameless opportunists and useful idiots: Frankenstein’s monsters whose strong-arm, dictatorial tactics should force us in the US and European core to think about how our international policies affect people in other countries. Rather than sitting here and thinking about how some people “just don’t want to be democratic,” we should be thinking about what we did to alienate them, and how we can fix that.

We’re All Friedmanites Now, IV (But for How Long?)

In the last three posts, I attempted to cover various issues related to the rightward shift in America’s economic policy- its history, its context and its effects. In the (thankfully) final chapter of whatever this is, I would like to offer some potential solutions (and, indeed, problem with those solutions) to the issue.

A big part of this issue is how economics is taught. As excited as I am to discuss economic pedagogy, I think doing so would run the risk of alienating my, like, seven regular readers. As such, I’ll touch upon them quickly and then move on to more prosaic concerns. Firstly, the focus on rational self-interest, I believe, has run its course. There needs to be a bigger focus on alternative decision-making in the economics curriculum. This should comprise not only a focus on behavioral economics, but also the role played by uncertainty, as well as the institutional, social and political context in which we make economic decisions. Secondly, there needs to be a debate on where the political center of mainstream economics lies. Clearly, Edward Prescott and Joseph Stiglitz cannot both claim to be dispassionate researchers despite their vastly different policy conclusions (I say this with a tremendous respect for Dr Stiglitz’s work.) Economists must either play a genuinely non-ideological position (difficult-to-impossible, given the inherently political character of our work), or be more forthright about their policy convictions (which everyone can pretty much tell anyway if they can read between the lines.) Similarly, adherence to particular economic schools needs to be toned down, and ideas should flow across these largely artificial boundaries more freely. Finally, the focus on static analysis- that is- analysis frozen in time must give way to more dynamic analysis. Static analysis need not be overthrown, as it provides a solid framework for analysis. But increasingly powerful computational tools for dynamic analysis are available every day, and we should avail ourselves of them. Agent-based computational economics is a very good start.

We cannot deny that a substantive political debate on inequality has begun. A very telling example of this debate is the speech Federal Reserve chairperson Dr Janet Yellen made a few days ago. Ten- even five years ago- we would have thought it a cold day in Hell when a nominally apolitical Fed chair would throw down a list of “center-left” talking points on the issue of inequality. It’s a testament to the gravity of the situation, and I would argue that characterizing these opinions (read: facts) as politically biased is unfair, given that these opinions (read: facts) are, in fact, facts. Dr Yellen (for whom I have tremendous respect, as she has broadly resisted the rightward drift in economics, actually takes non-mainstream approaches to economics seriously, and has broken into the upper-levels of the boys’ club) is actually the unbiased one- former Fed chairs, such as the ex-Ayn Rand associate Alan Greenspan are the partisans.

But the fact remains: Dr Yellen is a Fed chair, and while having a leader in the field of economics raise the issue is vital, there’s a limited amount monetary policy can do to alleviate inequality. Sure, a pro-growth monetary policy can help increase the size of the pie, which could then be distributed downward. But with today’s fiscal and incomes policies, that’s simply not a possibility. Clearly then, the solution is in fiscal and incomes policy. There are a few options, among others: a minimum wage hike, an expansion of the EITC, a wealth tax (i.e., a tax on assets), more progressive income taxation, increased education spending combined with an education policy overhaul. Of these options, the first two are politically viable in the immediate and the last one is politically viable only if the debt issue is solved (or people, rightly, start caring less about it). It seems hugely unlikely, however, that tax policies- the most powerful tool on the list- will be changed any time soon. This is a catch-22: political power is disproportionate because of inequality, and putting a big dent in inequality is difficult because of disproportionate political power.

Fortunately, the minimum wage debate is making gains in the political sphere. While it still has its discontents, some of America’s more progressive cities have already started the process of raising the minimum wage, and not before its time. Frankly, I believe that once we see that the effects of the minimum wage hike are slim-to-none, it’s only a matter of time before other cities, states and finally the federal government begin adopting better minimum wage policies. An even more viable option is expanding the EITC- as it is a targeted program that, theoretically, bears less influence on employment, there is a great deal of bipartisan agreement that it is a good framework for poverty alleviation. There seems to be a debate on whether to expand on EITC or raise the minimum wage- I see no reason why we cannot and should not do both.

Education is of key importance to the debate. Job market competitiveness requires more education as economies develop, and it should be intuitive to any reader that a more skilled workforce benefits from (and can create) greater opportunities. However, a feedback loop exists in education systems- greater income inequality reduces the quality of schooling in poorer areas, and poorer schools provide fewer opportunities for students. The skyrocketing costs of higher education (again, a function of the unique market power universities- especially private ones- hold) prevent decent skills training for those who need it most. There are two pressing concerns within the education debate, though- the first being that any decision to increase education spending and overhaul the school system will hit a debt roadblock. Debt is not actually all that important , but so long as we are convinced it is, we’re unlikely to see gains in this area. Secondly, a great number of highly educated people are still un- or under-employed. Education works, time and time again, but it is still not a panacea. A combination of growth, redistribution and education is required to affect a genuine shift in public well-being.

In light to the difficulty of solving the inequality issue, I have yet to believe we’re so far down the road that we should abandon all hope or start listening to Russell Brand. The least we can do is stay attuned of these issues, exercise what democratic rights we have left, and keep pushing for reform wherever we can. Perhaps a silver lining of politics not being all that polarized is that we’re all in the same boat- the same dingy, increasingly water-logged boat- together. We can use that. There are policy solutions available, but none of them will be all that useful if We don’t give a shit.

We’re All Friedmanites Now, III (or, the Putsch that Wasn’t)

“That [traditional economic theory] reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparently cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.”

– J M Keynes

In the previous two posts, I described the general rightward drift in economic policy and its resultant effect on political and social values. In this post, I would like to sum up just how things ended up the way they did.

The above quote summarizes the overwhelming power that traditional economic theories hold on policy makers, economists and society at large. These theories afford a certain convenience and Candidian optimism to those concerned with these issues. To doubt these conclusions was not only to be unscientific, but also to be a depressive doubting Thomas in the face of general optimism. In fact, it was partly a result of a generally depressive attitude toward mainstream economic theory during the Great Depression that allowed Keynesian ideas of public expenditure, progressive taxation, research spending, social safety nets and moderate regulation to take hold to the extent they did. In addition, a persistent sense of competition between the Allies and the Axis, and later the West and the Soviet bloc, lent a sense of urgency to equitable, socially and democratically acceptable economic policies. Some economists would argue that Keynesianism helped save capitalism. I would agree, with the added conjecture that it did so by making capitalism resemble socialism.

So, if these policies were so vital in maintaining stability and growth across the Western world, how did they come to be unseated with such force? The traditional story, often repeated in economics textbooks, claims that it was the combined economic stagnation and inflation of the 1970s (often termed stagflation) that caused these policies to be overthrown. Critics of Keynesianism such as James Buchanan and Robert Lucas claimed that Keynesian theory, which deals with economic variables in aggregate, “lacked microfoundations,” i.e., were inconsistent with the principle of rational, individual self-interest on which mainstream microeconomic theory is based.

This story would be more credible if there were not strong evidence that certain economists and policy makers were beating against the door of Keynesian theory, basically from the day the post-war Keynesian consensus was established. In 1947, a group of free market economists and policy makers founded the Mont Pelerin Society– a society dedicated to the maintenance of “freedom,” and resistance against the creep of “totalitarianism.” The cast list of the Mont Pelerin Society is an interesting one, it has included members such as Friedrich Hayek (Keynes’ chief intellectual rival), Ludwig von Mises, Milton Friedman, Chicago School economists Ronald Coase, James Buchanan and Gary Becker (the founders of rational choice theory– the idea that not only are economic actors all rationally self-interested, but also that this assumption on the human psyche can be applied to decision making in all spheres of human endeavor.) The society included a Chancellor of West Germany, a President of Italy, several Pulitzer Prize-winning journalists, and 22 of Ronald Reagan’s 67 economic advisors.

The stated purpose of the society being what it was, combined with the not insignificant wealth and influence of its members certainly raises some questions as to whether it was a simple set of concurrent economic problems which brought the greatest period of stability, growth and development the Western world had yet seen to an end. The development of neat, internally consistent theories like rational choice held the same scientific appeal that Keynes attributed to mainstream economic theory. Not surprising, as it consisted of little more than applying these ideas to a broader sphere. The ease with which these ideas can be spread when its pioneers play the role of educators and policy advisors can greatly speed up their acceptance. The sheer amount of social power that the Mont Pelerin Society and its political allies held ensured that these ideas could be enforced. All they needed was a convenient excuse, and, with stagflation, they got it. (Never mind that the stagnation was little more than a typical, if somewhat prolonged recession, and the inflation was largely caused by fiscal pressure from the Vietnam War and oil price hikes.)

The most devious trick of the Mont Pelerin Gang was convincing several generations of budding economists that their obvious putsch was not a putsch at all, simply by throwing a few graphs and a couple of sentences of text into the textbook. Keynes had rightly noted the role of power and wealth in maintaining theories. In a sense, he had made one of the few accurate predictions any economist has ever made, and with it, signed his own death warrant.

In the next and final post, I will discuss what, if anything, can be done to get us out of this hole.