The way many pundits tell it, the Democratic debacle in the 2014 midterm elections sounds like a perfect storm of bad breaks. The President was aloof. The party’s message was weak and muddled, in some races focused almost entirely on gender issues. Meanwhile record or near-record breaking waves of political money (for off year elections) cascaded through the political system while voter turnout plunged to levels last seen in 1942.
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
We’re now joined by Thomas Ferguson. He’s a professor of political science at the University of Massachusetts Boston, and he’s also a senior fellow at the Roosevelt Institute.
Thanks for joining us, Tom.
PROF. TOM FERGUSON, SENIOR FELLOW, ROOSEVELT INSTITUTE: Hi, there.
DESVARIEUX: So, Tom, French economist Thomas Piketty’s book Captital in the Twenty-First Century, it’s a bestseller. It’s really struck a chord with folks. What do you think is behind this? What do you think this means?
FERGUSON: Okay. Well, alright, Jessica, let me begin by declaring just a little bit of conflict–potential conflict of interest. I’m also the research director at the Institute for New Economic thinking, and we did help fund a very substantial portion of the research that went into the database that Piketty uses, the World Top Incomes Database. So I should say that.
The other thing I’d maybe better frankly confess is that everybody knows that Arthur Goldhammer, who translated the book, the best, I think, living translator from French into English there is, he was my roommate for many years back when I was teaching at MIT. So I’ll just–.
But now, that said, look, the striking thing to me is that a–we’ve got a book, basically has become a bestseller. And while it’s a very well written book and I don’t mind saying I think it’s very important and very good, even if, you know, there are things in it I’d probably do different if I were writing it, this is indeed remarkable. It’s almost without precedent. So what’s up?
And, you know, my take is–let’s just set aside the questions, the particular discussions about the book that people have been focusing on. I think what you want to pay attention to is this. There’s a political context here that is pretty important. Let’s go take a step back for a second, though, to understand that. We’ve all heard about framing these days, about how in political campaigns, parties, political parties, will try to discuss an issue with the idea of influencing the electorate’s response. That’s triggered a torrent of writing. A lot of it’s garbage and a lot of it is–you get way overstated claims for what framing can do. But there isn’t much doubt that if you can, for instance, build in effect a background noise and make it audible, you can influence folks in their thinking.
Now, in the current election year–I mean, I–here I don’t guess. I’ve seen some Democratic Party memoranda, or, rather, from their pollsters. Their own focus groups show that President Obama is not very popular with most Americans. You know, we can all debate whether that should be or shouldn’t be, but that’s a fact. What they also realize is that, you know, most people don’t think they’ve gotten very much out of the Obama seven years or six years, as it were, in office. But when they change the subject to things like inequality, they discover that then they get a much more favorable response compared to, say, Republicans. And, you know, it’s not hard, I think, to figure out why that’s the case. It’s because on the question of inequality, the Republican Party is essentially unpresentable. There is no way that you can sit there, preach it, tell everybody that the existing state of income distribution in the United States is in any sense optimal, or keep nattering on about job creation, etc. You know, it’s just–it’s a loser for Republicans, just like it was a loser in 2012.
Now, you could see last fall the president begin to give speeches on income inequality and draw attention to the issue. That led immediately to a discussion with even some of the center-right groups in the Democratic Party squawking that that was really a bad idea. It was pretty interesting to watch how the Center for American Progress, which is a think tank very close to the White House, then jumped into that debate, and some of their spokespersons began saying, well, you know, income equality’s a legitimate issue. Then you could watch the next step. John Podesta, who’d founded the Center for American Progress, rolled back into the White House as a senior adviser to the president. Then you could watch a little later when Piketty came to the United States–I won’t swear it was his first talk, but it was his first big talk, down at one of the affiliates of the Center for American Progress.
And then that sort of–what then happened is even more interesting. Now, to understand what then happened, you have to realize that the White House press corps pretty much congregates around the White House the way birds were said to do around St. Francis. And so if they see the White House doing something, they start to sort of pick it up, imitate it, and talk about.
Okay. What was really interesting to me is that Piketty gets an interview with the secretary of the Treasury. Now, look, I will tell you I know lots of people who work on income inequality, and they do absolutely outstanding work. They haven’t been granted personal interviews with the Treasury secretary. That’s a political move. And very plainly it was intended to sort of signal to Democratic friendlies in the press corps, this is, you know, an issue we’d like to talk about. They have all done this. I mean, just about every correspondent I know that has any kind of residual tendency toward the Democrats is starting to think, act, and talk like they are interested in income inequality, though when I directly asked people if they’ve actually read Piketty’s book, the answer is usually no. I mean, I have a feeling this is one of those books that is going to be more–it’s going to be bought and it’s going to end on a coffee table in a large chunk of the beltway. But, you know, that’s life.
Anyway, my point here is this is going to go on at least through the November elections. Then it will probably tail off a bit. It will–I can write this trajectory too right now (predictive social science is possible)–it will probably resume as the 2016 presidential elections come up again, and then it will stop abruptly pretty soon after that.
I mean, the thing I think we all want to watch in this is, essentially, this is the background music. It’s framing in a political context. It’s fun to compare the amount of space The New York Times devotes to this, for example, with The Wall Street Journal. Guess what. You’ll find less space on it in The Journal and a far more hostile treatment of the question. It’s just to illustrate my point.
And in that sense, you know, I’m glad for all the attention Piketty’s getting. As I said, I think it’s a really important book, it’s a good one, and it makes agreement on particular points just irrelevant in a sort of–from the standpoint of a discussion like this. But, you know, understand what you’re seeing here. It’s really a political phenomenon, and it needs to be produced as that. It’s not, as it were, Piketty or his book himself; it’s the phenomenon of the brick as bestseller, which, I would observe, as–because it’s done so well in the United States–when it came out in France it did well but not sensationally. Now it’s doing sensationally in France, too, and France is yet another country riven by deep political conflicts in which income distribution is emerging as a big question.
DESVARIEUX: But, Tom, do you see this in any way potentially that this could backfire for the Obama administration and Democrats if they are sort of riling the base and having this being a major issue in the November elections? But if people sort of wake up and their consciousness is transformed by this book, could you actually see this carrying on beyond November?
FERGUSON: Well, look, this is an interesting question. Art Goldhammer, when I talked to him the other–the translator, the other week, reminded me of Jacques Necker’s book on French finances in 1780, you know, just before the French Revolution. Necker was amazed to discover it became a bestseller. And, of course, Necker was the guy whose dismissal helped bring on one of the–maybe the greatest single event in the history of the world. I mean the French Revolution.
Well, so, yeah, Jessica, you know, we don’t know how people will calculate, but I do think this is that the Democrats have a real problem. You know, after six years, they don’t have–I’ve said this before on The Real News, and indeed I started saying it, meh, within a month after the president took office that the economic plan was too little and too late. And so, you know, this is one of these deals where they’re kind of running out of tricks.
They’ve got to try something. They’ve been in power six years, and for the average human, there’s just no recovery. So, you know, the stock market’s great, but for the average human there’s still huge numbers of people unemployed. Most everybody’s children who graduate from college have huge troubles finding jobs. I mean, it’s pathetic. It’s ridiculous. And, you know, people don’t know, necessarily, quite all the ins and outs of this, but the recoil away from, if you like, the out-in, in-out sequence that I’ve talked to you about before in great recessions and depressions is clearly at work here. I mean, Obama was really lucky to have somebody as inept and caricaturable as Romney to run against. He doesn’t have a Romney to run against this time. But they are well on the way to constructing, if you like, the social equivalent of Romney, and, you know, that’s not easy to do. I mean, you can’t overemphasize how outrageously partial to the super rich the Republican leadership is. but you’ve got to keep reminding people of that.
But I take your point. Where this stops–you know, it’s like Jacques Necker found out in 1780 that he had a lot more to do with his life than write a bestseller at the time.
DESVARIEUX: Alright. Tom Ferguson, thank you so much for joining us.
DESVARIEUX: And thank you for joining us on The Real News Network.
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Editor's note: This is the first in a new series from AlterNet's New Economic Dialogue Project, edited by Lynn Parramore.
Analysts of American elections routinely confuse the voice of the people with the sound of money talking. Habitual modes of thought and long standing incentives to reaffirm the democratic faith encourage grasping at straws. Pundits become hopeful that big money doesn’t matter as much as they feared, and that democracy is alive and well.
By eerie coincidence, the final seven days of the 2012 race to the White House began on Halloween. Even beyond the Frankenstorm, there’s something chilling that haunts these final days: the Ghost of the 2000 Election.
In California, the names of the latest victims are well known. San Bernardino, Stockton and Mammoth Lakes all filed for bankruptcy within the last few weeks. And Vallejo emerged from Chapter 9 protection just last year. The questions appear to be "Why all in California?" and "Who will be next?"
Editor's Note: The following is in response to an FEC statement released on July 17 by its press office reacting to a July 16 AlterNet article written by the authors. That article revealed that the authors had discovered key missing files in data downloads from the agency. The authors also posted a further explanation of their research and findings on July 17.
Lynn Parramore caught up with Roosevelt Institute Senior Fellow Thomas Ferguson at the annual INET conference in Bretton Woods. Ferguson, father of the Investment Theory of Politics, explains why polarization has completely gripped Washington — and why the New Deal is getting rolled back in the process.
Critics of an American preemptive assault on Iraq have repeatedly warned about its potentially disruptive short-term effects on the world economy. Much less attention has been paid to a more fundamental point. By setting a goal of "regime change" rather than weapons elimination, and by ostentatiously preparing to assume operational and oversight responsibilities in Iraq for a long stretch of time, the U.S. is sending a strong message to treasuries and foreign ministries around the world: In matters affecting either oil supply or the value of the dollar, we will act in our best interests, with little consideration of the interests or views of others.
A glance backward is the easiest way to see why oil and the dollar inevitably loom so large in any resolution of the Iraq crisis. The current configuration of the Middle East has its roots in treaties and understandings that grew out of the post-World War I settlement of the broken Ottoman Empire. That settlement was based on an assumption that the Russian Revolution had removed both Russia and Central Asia from the world oil market. Everything changed, though, in 1989, when the Soviet Union began to disintegrate and Russia and Central Asia came charging dramatically back into world oil markets.
With both the U.S. and the U.K. ardently promoting globalization, a traditional "spheres of influence" redivision of the world among the great powers did not occur. Instead companies and countries from all over the world started playing the new "great game" in Central Asia.
The blustering efforts of the Saudis to inhibit the flow of Russian oil to the West have received some recent publicity. These actions have caused tensions with the West, as have Saudi campaigns during the '90s to expand the influence of their austere brand of Islamic fundamentalism throughout Central Asia, including Afghanistan, and their ongoing rapprochement with Iran.
Then came Sept. 11, which brought into even sharper focus the points at which Saudi and American interests diverge. Since then, the Bush administration has expanded its efforts to weaken OPEC's grip on supply by developing oil resources in other parts of the world. Its cultivation of President Vladimir V. Putin and his Russian oil have drawn the most attention, but its policies toward Africa, Indonesia and South America also show clear evidence of this concern.
An American-led regime change in Iraq would take this campaign to a whole new level. It is now an accepted notion that lifting the current sanctions on Iraqi oil exports will put downward pressure on oil prices in the medium term. More important, however, Russian and most non-OPEC oil is relatively expensive to produce -- $15 a barrel or more. By contrast, Iraqi production costs, once damage from the war is repaired, should be highly competitive with Saudi oil at $5 a barrel or less.
This makes Iraq pivotal for stabilizing oil prices in both directions. If prices rise too high, Iraq can simply pump more. Less obviously, however, if the Saudis decide, as they have twice done in recent years, to wage a ruinous price war, lowering prices sharply in order to deter other cartel members from overproducing, then Iraq's role is again key. With another low-cost gas station open for business, the Saudis cannot count on maintaining total revenues as prices fall, because now they will have to split the take with the Iraqis. This downward price deterrence will be welcome news to marginal producers around the world, including those in Texas, and it is very important in assessing the long-run impact of the American move.
The currency implications of such a switch are equally momentous. The tremendous boom in U.S. stock markets in the '90s led to enormous inflows of foreign capital and sent demand for dollars soaring. In effect, the stock market bubble created a dollar bubble. With the stock market now coming back to Earth and American interest rates falling almost as low as those in Japan, only the prospect of even lower growth in Europe and Asia now sustains the dollar. In financial markets, the dollar's sharp decline earlier this year is widely regarded as a harbinger of things to come.
A major prop for the dollar has long been the simple fact that oil is priced in U.S. dollars. If the new Iraqi petroleum authorities announce that they will accept checks only in dollars, invest their surplus in dollars, and swell U.S. exports by contracting principally with American firms for services and goods, the dollar's prospects will brighten. As pleased as Europeans have been to seize chances to export under the umbrella of a high dollar, this will not be what they had in mind when they called in recent months for action to break the dollar's fall: Nascent ventures to create an oil futures market in euros may well be stillborn, while prospects will diminish for a long-term rebalancing of asset portfolios away from the dollar and in favor of the euro.
From a distant mountaintop like Capitol Hill, all this may seem like a vision of the promised land. In reality it is a desert mirage. The dollar cannot thrive in isolation. The need for effective multilateral action to shore up the world economy is growing urgent. We need macro policies to stimulate demand and stabilize the foreign exchange values of the major currencies.
The economic situation is frighteningly precarious in Latin America, where Argentina, Brazil and even Mexico have recently suffered currency runs. In Africa, efforts to provide resources for public health, treatment of HIV/AIDS and social infrastructure are in conflict with debt burdens that are strangling the capacity of the public sector to respond to the challenges. In an atmosphere poisoned by U.S. go-it-alone tactics in oil and financial markets, resolving issues of debt relief and rescheduling and international banking coordination will surely become more difficult. The current discord between Germany and the U.S. poses a special obstacle, because Germany remains a financial powerhouse, whatever its military weakness.
All this takes no account of what may go wrong within Iraq itself or in the rest of the Middle East after Iraq is liberated. As they did after World War I, tensions between the U.S. and its major allies may well inflame ethnic rivalries that will run rife in whatever political structure emerges in the new Iraq. In the worst case, a likely casualty of a unilateral U.S. attack on Iraq may well be the system of alliances that the U.S. has maintained since World War II. Going it alone in defense, as the new Bush doctrine proclaims, is bad enough. Going it alone on oil and the dollar is a momentous error.
Thomas Ferguson is professor of political science at the University of Massachusetts, Boston; Robert A. Johnson is former managing director of Soros Funds Management and served previously as chief economist of the U.S. Senate Banking Committee.