Category Archives: Crisis

Capitalism kills – even the middle class

This year’s Nobel laureate in economics[1], Angus Deaton (and his wife Anne Case, not to forget) has published an interesting study on mortality among white Americans compared to other groups and nationalities. Their astonishing findings can be illustrated in one single picture:

white americans

Sources: Anne Case and Angus Deaton; PNAS

Immediate reasons behind the soaring death rate among white Americans are self destructive behavior patterns such as alcohol and drug abuse, or direct suicide. As an explanation on the next level Paul Krugman[2] suggests existential despair.

Krugman points to the similarities between this US experience and the plunging life expectancy in Russia after the capitalist revolution in the 1990s that claimed ten millions lives, mostly men in productive ages (a catastrophe we have mentioned repeatedly on these pages). Two American scholars, David Stuckler and Sanjay Basu, have described the post-communist mortality in The Body Economics: Why Austerity Kills (Basic Books, 2013). The following picture shows life expectancy from birth for men in USA and Russia:

Life expectancy

Source: Stuckler & Basu (2013)

The Russian experience in the 1990s was really dire. Multi-millions of jobs disappeared. Many of the small and medium-sized “mono cities”, with usually just one dominant factory, simply closed down, leaving abandoned and crumbling buildings and remnants of retired citizens behind. Men in productive ages couldn’t bear it and accounted for most of the ten million who just disappeared for ever.

Astonishingly similar in Russia and US are the causes of death. In both countries alcohol and drug abuse play an important role, together with suicide. In Russia also other diagnoses soared, such as myocardial infarction among young men, otherwise rare. Stuckler & Sanjay mentions “social stress” as a syndrome underlying the deaths. Many men seem to have an innate pride, requiring that they are able to support themselves and their families. Bereaved every possibility to fulfill this task they appear to lose the purpose of life.

Deaton & Case conclude that the absolute level of despair isn’t the decisive factor behind the self destructive behavior. Instead they suggest that the middle-aged whites in America have “lost the narratives of their lives”. It seems to be more a question about the distance they have to fall when they exit from a higher altitude. Or in Krugman’s words: “we’re looking at people who were raised to believe in the American Dream, and are coping badly with its failure to come true”.

Krugman again: “If you believe the usual suspects on the right, it’s all the fault of liberals. Generous social programs, they insist, have created a culture of dependency and despair, while secular humanists have undermined traditional values.” It’s exotic for a Swede that there are influential conservatives in the United States who believe the unbelievable, reject the obvious and denounce reason; more so that they dominate the Congress and threaten to capture the presidency; and are doing so supported by billions of dollars from the corporate sector. In the most powerful nation that ever existed! The world must take a deep breath.

 

Notes:

[1] This is an honor to mention only when one thinks the Prize Committee has made a decent choice. Otherwise it’s an affront to Nobel that the Swedish National Bank instituted this prize in his name for something that perhaps Nobel, like many of us, wouldn’t even call a real science.

[2] In a recent New York Times’ column.

How to create a State Truth

Developments in Ukraine have driven media and majority opinion in Sweden quite nuts. Not even the traces of reason sometimes visible in New York Times can be detected here (except for dissident media outlets that no one has heard of). The Editor in Chief of our most important paper Dagens Nyheter – Peter Wolodarski – has turned into a paranoid buffoon conducting a limitless and hateful campaign against Russia and Putin.

Wolodarski and his colleagues in thought are acting as if their intention is to fire up conflicts and enhance the risk of a global war. Their simple truth is that Putin is an imperialist dictator; nothing that puts perspective on the whole Ukrainian problem is allowed to appear in print. That is: one of DN’s columnists, Johan Croneman, had the guts to curse in the church the other day, namely about the shoot-down of MH17.

Croneman had studied some of the works by Robert Parry and the Malaysian paper New Straits Times. Parry is a prize-winning reporter known for his role in revealing the Iran-Contra affair, and his webpage contains interesting information. There he describes a number of convincing indications that the shoot-down of the airliner couldn’t have been performed by the pro-Russian rebels. Foremost of those is the lack of pictures or other evidence for Russian Buk missiles transported into and out of Ukraine.

The Buk missiles are 5.5 meters long and the launch vehicles are more than double that length. Parts of the radar equipment are some 20 meters high. The whole battery demand support facilities carried by a number of large vehicles. Thus the units are easily detectable by US surveillance techniques. For the Buk system to be operative in the shoot-down it had to be transported quite some distance from Russia into Ukraine territory. And more than that: after the shoot-down, when the advanced US supervision machinery must have been intensely focused on the area, this caravan had to drive back to Russia. If US had pictures of this operation, is it conceivable that they had been kept secret to this day, Perry asks.

Other important indications are leaked testimony by independent arms experts, saying that the plane wreckage showed signs of being hit by a missile fired from an aircraft, plus bullet holes indicating machine-gun fire. The black boxes implicate another question. If they had contained evidence for the Ukrainian standpoint, wouldn’t that have been disclosed already? Now the whole question is remarkably muted.

Croneman’s observation and outrage concerns the absolute silence about these matters in Swedish media. I would add that conformity of this kind would hardly be possible even in a dictatorship. But here the political truth, declared by Carl Bildt two hours after the shoot-down, is prescribed as a state fact. Croneman sums this up as “unspeakably sad, and dangerous, and terrible”. (We have of course freedom of expression here, so Croneman isn’t fired, but he’s back writing about his ordinary topics: sports and movies.)

To recommend Wolodarski and all the other Swedes of his faith to read about the Ukraine problem in “one of the most prestigious periodicals of its kind in the world” – Foreign Affairs – would of course be presumptuous. In its Oct/Nov issue that rag publishes a comprehensive and analyzing article by John J. Mearsheimer under the rubric: “Why the Ukrainian Crisis Is the West’s Fault”.

From 1989 and on Russia was considered by the West as a defeated enemy which should accept total submission. The country itself soon became devastated and the population decimated after the capitalist remaking, and not much of a threat to anyone. Still it had to be contained, just as in the old Communist days. In violation of verbal pledges to Gorbachev NATO thus started to expand eastwards, by now having added twelve new states to its ranks. And this giant military machine has only one obvious enemy: Russia.

Mearsheimer reviews this history and its consequences, and concludes that the US and EU have one simple way to avoid every risk of an all-out war: declare (on paper this time) that Ukraine never will be a member of NATO. This trivial and rather natural solution has obviously been proposed also by people like Henry Kissinger, Zbigniew Brzezinski, former German Chancellors and others. But this is all too benevolent for Wolodarski et.al. who rather rub Putin’s face even harder into the mud.

And now for the most horrendous phase: Putin has achieved a cease fire which so far seems to work passably. He’s acting to bring some peace to the place – the son-of-a-bitch. He’s giving himself away, that imperialist dictator who’s supposed to restore the Soviet Union by violence. But just relax; Wolodarski will soon explain to us in what way Putin only tries to fool us into dangerous passivity.

Loan bubble in Sweden – promising a phenomenal burst

In July this year the Swedish National bank (Riksbanken) cut its key interest rate by two thirds, to reach the European norm 0.25 percent. The head of the bank – Stefan Ingves – had struggled to keep the rate high in his attempts to suppress the swelling bubble of private debt. He seemed to be one of the few economists in Sweden who really worried about that bubble. It’s just that he was accompanied by OECD, EU, the World Bank and other expert bodies who all have expressed serious concern and had given Sweden grave warnings. Finally Ingves had to give in to the majority of the board, who think that the debt problem should be dealt with by other means and by the government (which probably is correct since Ingves’ policy hasn’t prevented the bubble from growing pathologically).

As we have written earlier on this issue the amount of housing loans in Sweden have literally exploded during the last ten years, from 0.7 trillion SEK to 2.7 trillion, i.e. by 400 percent (1 USD = 6.8 SEK), and are still expanding. This increase is of course not even distantly founded on real economic factors. It has mostly been enabled by the banks emitting fictitious money. One important observation, never mentioned by economists, is that part of that imaginary money certainly has trickled into the economy and created a demand without much foundation in reality. We have hence lived beyond our means and the day of payment lies ahead, perhaps in the near future.

This trickle effect also puts some perspective on our Finance minister’s bragging about the Swedish economy, which apparently escaped the 2008 crisis better than many other countries’. It may have been a giant Keynesian experiment, except that the liabilities are private and has to be paid in real life by living creatures (not by state economies that can dribble with debts in different ways).

In the last statistics the debt increase had accelerated compared to the previous year. With the lowered rates now taking effect we can expect further aggressive uttering of loans by the banks. The other day I even had a letter from our large cooperative organization – Coop – trying to persuade me to accept a loan for a quarter of a million SEK, without any specific security. Everyone is eager to make some easy profits as long as it works. And when it doesn’t work anymore the banks rest assured that the taxpayers will save their stock holders from any losses. The same tax payers that will end up with a personal debt for lifetime if they aren’t among the least vulnerable.

Since politicians and economists can’t claim to be totally deaf and blind there has been some minor debate on the debt problem. But just shallow and scarce discussions, with the only exception of some miniscule measures guaranteed not to provide any real effects whatsoever. The present bourgeoisie government is expected to lose next month’s elections with a large margin, and it seems as if they willingly are handing over the problem to the Social Democrats.

In this rare debate one economist actually was admitted an op-ed in our main paper DN, one weeks ago. He dealt on some of the measures discussed, and strongly advised against one of them. We are in this country endowed with a tax reduction amounting to 30 percent of interest payments on all kinds of loans. One of the measures discussed is to repeal this right to reduction, an operation our economist strongly opposed. His argument was that such an action probably would trigger the avalanche and create the crisis it was intended to prevent.

Another aspect discussed is the norm for amortizing house loans. Those norms are extremely liberal here compared with most other countries. Since three decades house owners have de facto been relieved from paying any part of their loans whatsoever. Some demand for minor net repayments are now in place. Our economist’s argument generalizes to this measure, and to all others that has a substantive effect. A demand for repayment that really would impede increasing loans has to be of a magnitude that would tip too many house owners off the cliff and thus make the bubble burst.

It’s almost a law of nature that financial bubbles can’t be deflated in a controlled way. There is no smooth landing for a rocket. That’s probably one reason why our most distinguished economists are silent about the loan crisis. At best they are relying on the perfect market hypothesis, but probably they just prepare to keep hiding when the crash comes. Our politicians will probably put their heads in a bag and blame some previous government and the other parties.

Autumn and election years constitute a fruitful environment for financial crisis, both coming up soon in Sweden. Right now everything seems calm and under control, but that is also a precursor as good as any for dramatic events on the economic arena. I wouldn’t be surprised if the loan bubble here would burst any time soon, and if I had a house to sell I would already had done it.