August 13, 2010

Permanent, and Very Unnatural, Rate of Unemployment

Filed under: Globalization, Neo-feudalism, Peak Oil — Tags: — Russ @ 6:04 am


Although Obama’s hacks keep trying with diminishing success to claim he has any other than a corporate looting agenda, the truth keeps coming out.
The latest vicious example was the news that Obama’s using taxpayer money to help outsource American jobs to Asia. We’ve seen this before, for example when Obama encouraged GM to use taxpayer Bailout money to expand its operations in China. This time the written plot explicitly celebrates how the administration will help the same corporations we bailed out outsource IT jobs in order to take advantage of “lower labor costs.”
(The basic measure of a human being vs. an anti-human, subhuman piece of vermin is whether one’s view of people is that we constitute humanity, or whether we only comprise a “labor cost”,  just a resource to be mined, despoiled, burned up and transformed to waste, and discarded.)
This is clearly at the core of Obama’s idea of governance, of what the government should be doing. As I’ve said many times before, he starts and finishes with one question, “How will a policy set up opportunities for rackets to extract rents?” That’s his one and only measure of a policy’s attraction and even of its “moral” legitimacy (in the eyes of a corporatist psychopathic ideologue like himself).
That taxpayers are actually forced to fund their own destruction is also no doubt a source of amusement to him.
So that’s the context for the latest jobs report, another mileage marker on the gradual descent into Depression, as Bailout America destroyed another 131000 jobs in July. The official U3 number is at 14.6 million jobless, 9.5%. Half of these have been unemployed for longer than 6 months, the worst figure since the previous Great Depression.
Obama has led a propaganda charge to call this the “new normal”. Just before being driven out his adviser Christina Romer protested that there’s nothing to be accepted as “normal” about it, but rather that this is cyclical unemployment which should be rectified with countercyclical government action: real stimulus and a real jobs program. Well, she finally realizes she was in the wrong administration, if she was serious about that.
1.4 million Americans have been consigned to joblessness for over 99 weeks. This number of the permanent unemployed will only expand cancerously, as an intentional policy of the kleptocracy.
What’s the true unemployment figure, including the underemployed, the so-called “discouraged workers”, and other groups among the mugged? The most comprehensive government number, the U6, is at 16.5%, although this too is an underreporting. If we add those the system’s demoralization offensives have driven out of the job search completely, the “long-term discouraged” who were defined out of existence as unpersons in 1994, we get nearly 22%, according to Shadowstats’ Alternate Unemployment Rate. Another calculation using a more realistic figure for labor force participation than the government uses gives a U3 figure of nearly 14%. The U6 and the Shadowstats alternative would have to be adjusted upward accordingly. So we can see how the predicament is far more severe that the system wants us to know.
(That is, more severe from the point of view of the people. From the elites’ point of view, their feudalization project is more advanced than they’re letting on.)
The Bailout America regime calls the current official numbers the baseline of a “recovery”. Therefore it wants to normalize these numbers. While Obama would prefer that the U3 stay under 10% and the U6 under 20, in the end these numbers as well will be propagated as a backdrop of normal life, in the same way the Bailout, the Permanent War and the surveillance state are supposed to be. The reason permanent extreme joblessness has to be enshrined as the new normal is because the real economy is no longer slated to grow, but only to be cannibalized by the finance sector and the rest of the corporatized feudal power structure. Peak Oil means the end of growth and the end of the exponentially expanding number of jobs to be done in a “growth” economy based on fossil fuels. Just as a circle of debt and consumerism and jobs which were part of that consumer economy temporarily spiraled up and outward, so now the contraction sets in, and as debt can no longer be sustained, the people as consumers can no longer function, and therefore the people as workers are no longer viable. We the peasantry are now just cannon fodder for anything profligate with human life – wars, slave labor in the fields and mines (without fossil fuels the methods of antiquity again become relevant), or just being sequestered to starve and rot and freeze.
Since a jobs program would spend lootable money on the people who created it in the first place and not on the gangsters, it’s a non-starter. Instead the liquidation process will proceed and intensify in the form of rising permanent joblessness.
This is all of course premised on a vast crime, and everything which is alleged to be natural or inevitable about it is in fact completely artificial and the result of nothing but political choices.
The Big Lie has long been that full employment isn’t possible. The reality is that it’s only ever been “not possible” given the premise of capitalism itself, artificial scarcity, and in particular the premise of kleptocracy founded upon the anti-sovereign empowerment of the oligopoly finance sector and all the other oligopolies which ramify out from it. (Google was the latest outfit to officially come out as a racket and no longer an entrepreneurial competitor.) From this point of view, full employment was never desirable and therefore had to be ideologized as not possible.
If on the contrary our premise is that civilization should be for the benefit of the people who work to produce it on a daily basis, then obviously full guaranteed employment is not only the imperative moral decision, but the most rational, productive, and efficient way of ordering society, purged of all rents and artificial barriers to the free flow of economic energies. (Corporatism is based on artificial monopoly and scarcity.)
So the very concept of a “natural rate of unemployment” is meant to ideologically justify the number of able and willing producers who are being intentionally barricaded out of the economy. Marx called this the reserve army of the unemployed. Under the Oil Economy this reserve army resource could be brought into production or withheld depending upon the interest of the elites. Under Peak Oil this army becomes ever larger.
Corporatism was already based on artificial scarcity while the economy was well-oiled. To maintain it post-Peak means to sustain a rising level of real scarcity, to which must be added the artificial scarcity in order to maintain the social control aspect of the reserve army. This “real” scarcity is of course real only under corporatist conditions. If we systemically overthrew all the premises of growth and surplus value and consumerism and replaced them with a steady-state producer-controlled equitable-distribution economy, there would be no real scarcity, nor any artificial scarcity.
But what the kleptocracy seeks today is artificial scarcity on top of artificial scarcity, or a new kind of meta-scarcity.


  1. “1.4 million Americans have been consigned to joblessness for over 99 weeks. This number of the permanent unemployed will only expand cancerously, as an intentional policy of the kleptocracy.”

    In essence the Obama stimulus program is a stabilization bid for antiquated commercial “buggy whip” commerce. For example, GM was a pension plan in search of employment for 25+ years. Thus, the so-called stimulus program has crowded-out entrepreneurs and SMEs, the major components to job growth.

    Comment by Stephen A. Boyko — August 13, 2010 @ 11:37 am

    • It’s impossible for stimulus to crowd out anything when there’s 17% U6 unemployment.

      Comment by reslez — August 13, 2010 @ 8:12 pm

      • How many SME loans do you think bank regulators will permit in this reform environment?

        Comment by Stephen A. Boyko — August 14, 2010 @ 8:28 am

      • The idea that bank regulators are the limiting factor on SME loans right now is laughable. Toothless banking reforms have nothing to do with it. Banks are not issuing loans because they can’t find credit worthy borrowers. And borrowers have no desire for loans because they have no desire to expand. They can’t. Weak demand.

        The housing boom doesn’t contradict any of this. During the boom, banks issued all kinds of loans that could never be supported by income (the borrowers were not traditionally credit worthy). Banks made the loans anyway because the borrower was expected to refi out, and if not the loan was backed by a rising asset, and at any rate securitization meant it was somebody else’s problem. All three no longer apply.

        Comment by reslez — August 14, 2010 @ 5:41 pm

  2. Everything Obama does, by bailing out and further entrenching oligopoly rackets, crowds out any would-be legitimate entrepreneurs.

    For example, if net neutrality is gutted, it’ll be the end of not just Internet democracy but a severe blow to online entrepreneurship as well.

    Here’s my most recent posts on this, what’s by far the most underappreciated crisis in the blogosphere.




    Comment by Russ — August 13, 2010 @ 3:38 pm

    • One-size-fits-all governance is toxic for our economic well-being. The blog post http://readingthemarkets.blogspot.com/2010/07/dodd-frank-fine-alphabet-soup-appetizer.html considers the way in which the politics of capital market governance is like the French Generals who built the Maginot Line’s fixed fortifications in reaction to World War I tactics. Dodd and Frank proposed legislation is in response to the most recent crash. Their response focuses on scale, Too-Big-To-Fail (“TBTF”), rather than the economic randomness of predictable, probabilistic, and uncertain valuations which is Too-Random-To-Regulate (“TRTR”) e.g. where is the definition for “systemic risk.” Our “financial generals” have unfortunately conflated risk and uncertainty in deterministic, one-size-fits-all governance metric that almost certainly will result in a dysfunctional price discovery mechanism leading to increasingly more frequent and larger economic dislocations.

      Stephen A. Boyko

      Author of “We’re All Screwed: How Toxic Regulation Will Crush the Free Market System” and a series of articles on capital market governance.


      Comment by Stephen A. Boyko — August 14, 2010 @ 8:38 am

      • I let this go up, but going forward I’d prefer comments that aren’t just undifferentiated ads for one’s own blog.

        Comment by Russ — August 14, 2010 @ 10:31 am

      • @Russ

        I have no blog. Do you object to one or both references?

        The first reference is to a guest article I did for someone else’s glog. And would gladly do for you when-and-if the opportunity presents itself.

        The second is for a book written and paid for by the publisher. So I do not have a conflict of interest through commission, but I benefit from exposure of my ideas.

        Question: in keeping with transparency, how do you quote something about which you have already written?

        I have over 40+ years of capital market experience (see website management and feel very strongly that the legacy, one-size regime is a disaster of growing proportions.

        Comment by Stephen A. Boyko — August 14, 2010 @ 1:16 pm

      • OK, fair enough. I guess it just seemed like you keep plugging with the same terms but not really responding to the post.

        I guess I’m just punchy today.

        Substantively, I don’t think the problem is not-good-enough regulation. This blog is dedicated to the proposition (among others) that rackets like the big banks cannot effectively be regulated at all and must be destroyed completely.

        But I do agree with your Maginot Line reference. (But any proposed regulatory regime is just a different Maginot Line.) It’s been driving me nuts how everyone in the blogosphere keeps getting that wrong.

        Comment by Russ — August 14, 2010 @ 4:05 pm

      • @ Russ

        “It’s been driving me nuts how everyone in the blogosphere keeps getting that wrong.”

        It is because they are more interested in political “gotchas” that cognitive “gotits”

        “big banks cannot effectively be regulated at all and must be destroyed completely” __ by competition (i.e. big 3 autos).

        Regulated industries become oligopolies that favor other oligopolies. This helps explain why competitive markets are difficult (as opposed to undesirable) to establish via regulation.

        Regulation is a negatively defined business “Thou shall not …except for.” The key is to get a comparative advantage exemption that acts as a barrier to entry for others and enables you to conduct your business unencumbered.

        So Goldman settles, in most cases neither admits nor denies, pays $550 million as the cost of doing business, establishes settled case law that makes the federalis happy. GS then petitions the regulators for a narrowly defined exemption that protects their comparative advantage (that was a tacit agreement from the settlement) for conducting a specific type of business.

        And the hits just keep on coming.

        Comment by Stephen A. Boyko — August 14, 2010 @ 5:20 pm

      • Yes, and competition can only exist as long as concentration and size are obliterated and never allowed to congeal again.

        Of course, competition itself has been proven not to achieve the consistently greatest productivity, and we know what it does for equity and justice.

        So there’s no rational reason to exalt it, but only if one has a more Social Darwininst ideology. One can, I suppose, moderately value it, within limits.

        That’s why many anarchists think there’s broad latitude for the voluntary cooperatives to exist on a more communal or more competitive basis, as long as non-heirarchy is maintained throughout.

        As always, that requires responsible institutions like useful possession constituting the basis for the means of production, rather than calcification of “property” as the basis.

        Also never allowing any structure to get too big or concentrate too much power.

        Comment by Russ — August 15, 2010 @ 1:45 am

    • @ Russ

      See GAAMA Model

      Comments on Release No. 34-49695, File No. S7-22-04 (June 9, 2004)

      Click to access saboyko060904.pdf

      Click to access OP-1189_1_1.pdf

      Think before you regulate: Choose a better model, SFO Magazine, May 2009, Stephen A. Boyko,


      Comment by Stephen A. Boyko — August 15, 2010 @ 8:54 am

  3. Don’t forget 2.3 million Americans — 3.2% of adults — in prison or jail, half for non-violent offenses. Talk about social control. And unless you belong to the tribal elite any conviction dooms your chances of future employment.

    One of the reasons mountaintop removal mining has become popular is because it reduces labor costs (“traditional underground mining methods involv[es] hundreds of workers” [wp]) . The regime doesn’t even want us as slave laborers. They’d rather eat their own seed corn (the fossil fuels for the required machinery).

    Minor quibble, taxpayers don’t fund anything. The government creates money at will (MMT I know…). Taxes are extracted only to control inflation. The fact that taxes are inflicted on those who can least afford them demonstrates the dark sarcasm of the system.

    Comment by reslez — August 13, 2010 @ 8:11 pm

    • Yes, I know, but I’m not an economist wonk. It’s broadly true, and morally true, that the taxpayer funds a system dedicated to his destruction. That’s all I need to ethically justify any kind of “taxpayer” rhetoric which I think could be helpful in any particular example.

      I think some MMTers are so enamored of their theory that they forget that money’s a joke anyway. At first I thought MMT was sort of holding up the funhouse mirror to the fiscal terrorists: “You say deficits are a critical problem? Our theory says they’re no problem at all, so there!” I applauded that.

      But now I think they’re sometimes serious about delusions of continuing “growth” and even exponential debt using their theory as a panacea.

      [Add: In a world without incipient resource limits and depletions, and where reformism were politically possible, I’d agree that MMT sounds plausible. The basic idea that deficits in the sovereign currency can’t do harm by any rational measure as long as there’s significant underutilization in the real economy seems logical.

      The reason I regard all this as a joke, however, is that resource limits will soon dictate a major contraction of the real economy. So while I’d be happy to support MMT prescriptions as part of what I call bridging strategy (something I plan to write about one of these days), I can’t take any of it seriously as long run policy truth.

      Then there’s the political fact that even if there were no physical limits, reformism cannot work under kleptocracy. Any policy prescription including those of MMT would if enacted simply be subverted to the purposes of robbery.

      That’s why I say MMT could be good as part of an aggressive transformative package, but is no more progressive on its own than a VAT would be. Anything on its own would only be hijacked, and is therefore objectively regressive wherever advocated as a stand-alone within kleptocratic parameters.

      Indeed, I’ve seen the suggestion that the rich should get behind MMT because they can use it to argue that all taxes (for them) should be abolished.

      Finally, what I like best about MMT is what I regard as its philosophical core, the proposition that since money is created only by the government and only as an economic lubricant, therefore money as a “store of value”, i.e. hoarding of it, has no rational or moral legitimacy.

      This, to me, sounds close to the anarchist critique of idle, useless “property”: Since all value is a cooperative endeavor, and the only rationale for allowing property rights would be to increase the cooperative value and happiness, therefore as individuals and groups we have a legitimate right to useful possession, but none to stagnant hoarded “property”.

      I think the application of this to money, purging the concept “store of value”, is an important step, and MMT can help with it.

      I haven’t yet devoted a post to MMT, but I’ve been planning to. This comment can probably serve as an outline when I do.]

      MTR is something I try not to think about by now (there’s enough horrors in the stuff I have to look at). But your mention does bring back a memory.

      I used to be mostly an environmentalist (but I always hated the supremacy of what I now call corporate environmentalism and the moribundity of the true Earth First! spirit).

      One of the examples which broadened my horizons was when, in reviling the environmental effects of MTR, I read about the socioeconomic devastation of it, and how the very purpose of it was to liquidate workers. If I recall correctly, MTR requires only one third as many.

      That was one of many examples where environmental destruction seemed to be part of a much larger campaign of social and economic destruction and dominance. Once I started looking for it, I found it everywhere, and from reading about the environmental assault of globalization and its “treaties”, I read about globalization’s general assault on the people.

      Soon the full magnitude of the class war (something I accepted in principle but hadn’t really though much about) started to become clear.

      Comment by Russ — August 14, 2010 @ 3:53 am

    • Wow, I think that comment expanded a bit since I originally saw it last night (or more properly this morning).

      [Let me preface this comment with a request: Please don’t consider me a religious devotee of MMT. I find it useful, and better than its competitors. That’s as far as it goes. So when I say below that it’s accurate or correct, I mean that it’s more accurate and correct than other theories. I don’t intend to suggest that MMT is perfect in every way, will never have any problems or inaccuracies, or could never be twisted to evil ends.]

      Unlike corporatism, MMT is not inherently incompatible with sustainability. MMT is, first of all, a description of how the monetary system presently works. It is a “fraud dispeller”. Because it is accurate, many of its conclusions highlight the injustice and sheer shortsighted stupidity of the present system. (If it did not do so it could not be accurate.) Some MMTers ignore this aspect and go straight for the Rx bottle: how to get growth restarted. But most MMT-ers believe the government’s purpose encompasses social justice and sustainability. MMT reveals how the government can use its monetary tools to work toward these ends. Far from ignoring resource limits, just yesterday Bill Mitchell wrote an extensive post about his Job Guarantee scheme where in passing he criticized Marxism for postulating a framework consisting purely of labor and capital. “But the concept of natural capital, ignored by Kalecki and other Marxians, is now becoming the binding constraint on the functionality and longevity of the system. It doesn’t really matter what the state of distributional conflict is if the biosystem fails to support the continued levels of production.” (link)

      Obviously MMT does not magically create 3 Earths where there was one, or 2 billion people where there are 7 billion. These resource limits cannot be solved by any economic system. If there are too many people for the Earth to sustain, there are too many people. That is a horror that cannot be bargained away — not Great Depression Part 2, but Black Death Part 2. Who lives and who dies becomes essentially random. With devastation of that scale control is an illusion. Jared Diamond in Collapse wrote that if all the rich can buy themselves is the privilege of dying last, their wealth really does not count for much. Diamond is ridiculously optimistic when it comes to the chances of corporate cooperation with reform. I suppose he needed to end his book on an optimistic note to guarantee sales.

      Some people might view MMT as a magical elixir that can solve all of capitalism’s or humanity’s problems; such shallow thinking is hardly unique. MMT clarifies the difference between real world resources and production limits versus meta/map issues like money, debt and other forms of theft. MMT provides a framework to expose the prevailing frauds, a conceptual understanding that need not end merely at federal deficit accounting, as you pointed out in your comment. Most people really do think government spending is constrained by taxes. You could see how shocked they were when TARP proved the government can cough up $800 billion whenever it wants to (for the rich). The fraud was exposed. Two years later the political ramifications continue to echo through the system.

      All these are lies:
      We can’t afford to keep every citizen employed.
      We can’t afford a clean environment.
      We can’t afford to move toward a sustainable, localized economy.

      The truth is not that we can’t afford it. It’s that the ruling class doesn’t want it. MMT pokes a hole through the “we can’t afford it” lie. When people come to understand that, they also come to understand the reason for the lie. Because of course what we really can’t afford is to waste 20% of the population in long term unemployment. Not only does it represent trillions in productive resources going to waste — the shame and stigma and poverty from long-term unemployment causes crime and decreases educational attainment for children in the same household. So unemployment has generational effects that continue for decades, passed on to children like a congenital disease. What is the point of an economic system that shackles most people to debt for their entire lives? What is the point of a system in which people have no land on which to grow food, that forces people to sell their labor to industrialists in order to live, when the industrialists don’t even want their labor? Why should the people support a system that enriches thieves and rapes the environment?

      Does MMT improve the chances of systemic change? Absolutely. Before you can achieve anything you have to start with the truth. No one said it would be easy.

      Comment by reslez — August 14, 2010 @ 7:13 pm

      • Good rundown, reslez.

        Yes, I did expand the comment, in the part with brackets labeled “Add”.

        It seems to me that beyond the basic prescription for fiscal policy, MMTers are still very much in dispute over much else, like you say regarding the place of natural resources, or as far as what should be done or if MMT even has any “shoulds” at all. (I think I’ve even seen someone denying that the fiscal expansion is a prescription, rather than something it merely validates as a reasonable option.)

        I think the whole point of anything is to achieve the best outcome, so I look to anything for how it provides the right prescriptions.

        Since nobody owns MMT, none of its current luminaries can dictate whether or not it has a moral policy imperative.

        I agree completely that whatever the limits of resources, the scarcity we’ve always suffered has been the result of artificial, system-imposed political choices. That’s still true even today. To what extent post-Peak Oil we face scarcity of necessities (as opposed to winding down luxuries) will also largely be a function of political choices.

        (That’s the same still-not-fully-baked idea I was broaching in the OP.)

        What I meant by a “bridge” in the above comment is that there are things like a jobs guarantee (which, according to my impression, some MMTers think is implicit in the theory, while others think it can be derived from the theory but isn’t part of it) or single payer which, while also having to be wound down as the growth economy is de-sized, deconcentrate, and decentralized, could if they existed going in do much to ameliorate the hardships and disruptions of energy descent.

        So that’s how I look at a thing like MMT.

        I also agree with those who think it needs a new name, or at least a political name to go alongside the wonk name. Maybe “Citizen Money” or “Patriot Money” or whatever.

        Finally, you’re right that nothing will be easy, nor is it likely to be quick. (I do think that all too many demand instant gratification, whcih is what makes it so hard to get people to renounce the kleptocracy, e.g. the Democratic Party, once and for all. “But what’ll we do in 2012?! We can’t get a real Third Party up and running by then!” Well, if we can’t then we don’t. Things take time.)

        Comment by Russ — August 15, 2010 @ 1:32 am

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