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4 Reasons Why Socialism Is Becoming More Popular

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The newfound openness of large numbers of Americans to socialism is, by now, a well-documented phenomenon. According to a Gallup poll from earlier this year, 43% of Americans now believe that some form of socialism would be good thing, in contrast to 51% who are still against it. A Harris poll found that four in ten Americans prefer socialism to capitalism. The trend is particular apparent in the young: another Gallup poll showed that as recently as 2010, 68% of people between 18 and 29 approved of capitalism, with only 51% approving of socialism, whereas in 2018, while the percentage among this age group favoring socialism was unchanged at 51%, those in favor of capitalism had dropped precipitously to 45%. The same poll showed that among Democrats, the popularity of socialism now stands at 57%, while capitalism is only at 47%, a marked departure from 2010 when the two were tried at 53%. A YouGov poll from earlier this year showed that unlike older generations, which still preferred capitalist candidates, 70% of millennials and 64% of gen-Zers would vote for a socialist.

The question is why socialism now? At a time when the American economy under Trump seems to be chugging along at a nice clip, why are so many hankering for an alternative? I would suggest four factors contributing to the situation.

Factor #1: Ignorance of History

The first cause of socialism’s popularity, especially among the young, is an obvious one: having grown up at a time after the end of the Cold War, the collapse of Europe’s Eastern Bloc and China’s transition to authoritarian capitalism, “these kids today” — those 18 to 29 year-olds who were born around the last decade of the 20th century — don’t know what socialism is all about. When they think socialism, they don’t think Stalin; they think Scandinavia.

Americans’ — and especially young Americans’ — ignorance of history is well-documented and profound. As of 2018, only one in three Americans could pass a basic citizenship test , and of test-takers under the age of 45, that number dropped to 19%. That included such lowlights as having no clue why American colonists fought the British and believing that Dwight Eisenhower led the troops during the Civil War. Speaking of the war during which he actually led the troops, many millennials don’t know much about that one either. They don’t know what Auschwitz was (66% of millennials in particular could not identify it). Twenty-two percent of them had not heard of the Holocaust itself. The Battle of the Bulge? Forget it. Go back further in time, and the cluelessness just keeps deepening. Only 29% of seniors at U.S. News and World Report’s top 50 colleges in America — the precise demographic that purports to speak with authority about America’s alleged history of white supremacy — have any idea what Reconstruction was all about. Only 23% know who wrote the Constitution. So much for any notion that this is the most educated generation ever.

Closer to the theme — socialism — the same compilation of survey results includes the attribution of The Communist Manifesto’s “from each according to his ability; to each according to his needs” to Thomas Paine, George Washington or Barrack Obama. Moreover, among college-aged Americans, though support for socialism is pretty high, when these same young adults are asked about their support for the actual definition of socialism — a government-managed economy — 72% turn out to be for a free-market economy and only 49% for the government-managed alternative (yes, it looks from those numbers like there are a lot of confused kids who are in favor of both of the mutually exclusive alternatives). As compared to about a third of Americans over 30, only 16% of millennials were able to define socialism, according to a 2010 CBS/New York Times poll. And though I haven’t seen polling on this, I’d be willing to bet that a good bunch of these same students, if asked to say what the Soviet Union was, would have no clue or peg it as some sort of vanquished competitor of Western Union.

Compounding the problem still further is that the history that students are being taught increasingly falls into the category of “woke” history , America’s history of oppression as imagined by the influential revisionist socialist historian Howard Zinn . When socialists are writing our history books, the end result is preordained.

Given such ignorance and systematic distortion of history, is it any surprise that millennials who never lived through very much of the 20 th century don’t think socialism is all that bad?

Factor #2: Government Bungling

When we try to explain the socialist urge, we cannot lose sight of the fact that our government keeps interfering in the economy in ways that give people every reason to think the system is corrupt and needs to be trashed.

Take the skyrocketing cost of college, for instance. On the surface, this looks like greedy capitalist universities just keep on raising tuition, and since most college kids and their parents can’t pay the sticker price, almost 70% take out loans , saddling young people trying to start their careers with a mountain of debt (almost $30,000 on average). This results in all those socialist promises of free college or loan forgiveness sounding dandy. Underneath the surface, however, a huge part of the problem is federal grants and subsidized loans. If the government stopped footing a large part of their bill, more students and parents would be forced to pony up, which would mean, in turn, that colleges would not be able to keep hiking their prices without seeing a precipitous drop in enrollment. They would, instead, be forced to price themselves at some level that applicants could realistically pay, making college more affordable for a large segment of the American middle class.

Another simple example of the problem is Obama’s Emergency Economy Stabilization Act of 2008, colloquially known as the big bank “Bailout.” When kids grow up seeing government tossing out free lifelines to businesses that get themselves in dire straits, cause a massive financial crisis and, in the process, lose ordinary folks lots of jobs and homes, we can’t blame them for concluding that the system is rigged.

There are many more examples where these came from — our government frittering away trillions on foreign wars that increase instability throughout the world and end up costing us even more as we scramble to clean up our own messes is one expenditure that comes readily to mind — but the point is this: the more the government interferes in the economy to help out vested interests, the more reason many of us will see to ask government to interfere in the economy to help out the rest of us. The more reason we give anyone to think that capitalism means crony capitalism, the more they’ll clamor for socialism.

Factor #3: Universities’ Ideological Monoculture

The supporters of socialism are not simply the young, but rather, disproportionately those among the young who are college-educated. And the more college they have, the hotter for socialism they get. According to a 2015 poll , support for socialism grows from 48% among those with a high school diploma or less to 62% among college graduates to 78% among those with post-graduate degrees. Those on the left probably stop thinking hard about now and jump immediately to the conclusion that support for socialism is just a natural outgrowth of big brains and elite educations. But there is, in fact, a less obvious but ultimately far more compelling explanation that also manages to account for the general fact that more education correlates with more leftism: something — something bad — is happening at universities themselves to pull students toward the (far) left.

We have already seen above that what’s not happening at universities, even elite universities, today is a whole lot of education in important subjects like history. What we are getting instead is a lot of groupthink and indoctrination. Universities have always skewed a bit left. But beginning in the early to mid 1990s (for reasons I’ve explained in some detail elsewhere ), ideological diversity began to vanish entirely, as the leftward deviation turned tidal. As documented in a 2005 paper from Stanley Rothman et al., as of 1984, 39% of university faculty were left/liberal, and 34% were right/conservative. By 1999, those numbers had undergone a seismic shift: faculty was now 72% left/liberal and 15% right/conservative. Since 1999, the imbalance has become starker still. A comprehensive National Association of Scholars report from April 2018 from Prof. Mitchell Langbert of Brooklyn College, tracking the political registrations of 8,688 tenure-track, Ph.D.-holding professors from 51 of U.S. News & World Report’s 66 top-ranked liberal arts colleges for 2017, found that “78.2 percent of the academic departments in [his] sample have either zero Republicans, or so few as to make no difference.” Predictably, given the composition of the professoriate, survey data also indicates that students’ political views drift further leftward between freshman and senior year.

In light of this data, it should not be a surprise to us that students who have gone to college in this age of ideological extremism have come out radicalized and … socialized.

Factor #4: Coddled Kids

The young have always been more inclined to embrace pipe dreams — a lack of familiarity with the complicated way in which the world actually works, coupled with the college fix described above, will do that to most anyone — but there is a reason the mindset of today’s young’uns is particularly susceptible to the red menace. In last year’s The Coddling of the American Mind, the prominent social psychologist Jonathan Haidt and FIRE’s Greg Lukianoff describe the species of overprotective parenting and instilling of baseless and uncritical self-esteem by parents and educators alike that came to prevail as kids were growing up in the 90s and 00s. When we are raised in the belief we are wonderful just as we are, we never learn the critical life skills of self-soothing, working through anxiety, facing obstacles and overcoming adversity. The predictable result, as Haidt and Lukianoff observe, is a demand to be safeguarded — safe spaces, free speech crackdowns and so on. The state appears to many as the appropriate institution to provide this sort of “safety.”

If these four are the primary causes of socialism’s rapid surge in our midst, then the next logical question is what to do about it. There is no easy answer, of course, but I would suggest that the radicalization of academia is the lynchpin issue. If we could succeed in reversing that tsunami, many dominoes would fall: we would be addressing the university monoculture that systematically distorts research, sends students veering hard left and graduates generations of left-orthodox clones who find their way into journalism, government, education, entertainment and other influential sectors driving public opinion and shaping the other three downstream issues factoring into socialism’s rise: government policy, educational philosophy and the manner in which history is taught. Many have observed that our universities are in crisis, but that crisis also represents an opportunity to avert the much larger socialist cataclysm that threatens to engulf us all.



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Economy

Brazil and COVID-19: Favela Residents and Indigenous Communities Among Those Most at Risk

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As of noon on April 8th the total number of Covid-19 positive cases reported by Brazil’s health ministry exceeded 14,000 and the number of deaths exceeded 700. This is, by far, the highest number of reported cases in Latin America (though Ecuador has a greater number of reported cases and deaths on a per capita basis).  The actual number of cases is likely many times greater, given that the current rate of testing for Covid-19 in Brazil is still very low – 258 per million, compared to 3,159 per million in Chile, 6,423 per million in the U.S. and 10,962 per million in Germany. In São Paulo, Brazil’s biggest city, and the hardest hit urban area in the country, the local health secretariat is reportedly only providing tallies for severe cases of the virus.

Far right Brazilian president Jair Bolsonaro, an admirer and close ally of President Trump, has been seriously downplaying the gravity of the pandemic. He has referred to the virus as a “little flu” and has openly flouted social distancing measures, promoting political rallies in mid March and wading into crowds of supporters.  Ironically, prior to the recent rallies, senior members of Bolsonaro’s cabinet tested positive for the virus following an international trip that included a meeting with Trump at Mar-a-Lago.  These and other members of the delegation were among the first imported cases of Covid-19 to Brazil (and it is rumored that Bolsonaro himself was infected).

As seems to be the case with his U.S. counterpart and mentor, Bolsonaro’s rejection of experts’ recommendations has a clear motivation: keeping the economy running at all costs.  Even before the virus arrived, Brazil’s economy was in sad shape, with no signs of real recovery following a deep recession in 2015-16. Unemployment remained stubbornly high (more than 11.6 percent in February) and economic growth stood at less than one percent during the first year of Bolsonaro’s presidency (as might be expected given the government’s constitutionally-mandated austerity policies).  As is the case in most of Latin America (see ECLAC’s grim predictions for the region), business state and local shut-downs and stay-at-home measures designed to save hundreds of thousands of lives are expected to have devastating economic consequences.  Brazil’s biggest bank, Itaú, forecasts as much as 6.4% negative economic growth for 2020 alone if virus containment measures are maintained for an extended period of time.

In response to these and other dire predictions, Brazil’s lower house has passed a “war budget” amendment to the constitution, which – if approved by 3/5 of the Senate – will ease current draconian budget constraints and allow the state to engage in significant deficit spending to try to address the country’s looming health and economic emergencies.  Meanwhile, many of Brazil’s state governors have ordered non-essential businesses to close and have supported social distancing measures. In response, Bolsonaro has engaged in heated clashes with governors and threatened to issue a decree forcing businesses to re-open throughout the country. He has also butted heads with his own health minister, Luis Henrique Mandetta, who has supported strong social distancing protocols, threatening at one point to fire him.  Currently Mandetta has the highest ratings of any politician in the country while Bolsonaro’s favorability ratings have been sinking. Millions of people in cities across Brazil have protested Bolsonaro’s dismissive approach with regular panelaços – loud, pot-banging protests staged from residents’ windows and balconies. Brazil’s major leftwing leaders have called for the president’s resignation. 

It’s possible that Bolsonaro is making a long-term political calculation,  attempting to position himself to better weather the coming economic tsunami by blaming others for taking lifesaving measures that shut down much of the economy.  Here again, his behavior bears similarities with that of the occupant of the White House.

Regardless of what social distancing steps are taken throughout Brazil, many observers believe that the pandemic will exact a particularly terrible human and economic toll in the country’s poor favelas, where around 11 million people live.  Historically neglected by public authorities (apart from police agents engaged in increasingly widespread extrajudicial killings targeting Black youth), favela communities have extremely limited access to healthcare resources and water and sanitation infrastructures.  As Brazilian-Colombian researcher Nicole Froio explains in NACLA, many favela residents are simply unable to wash their hands regularly or practice social distancing measures in houses where large families share tiny living spaces.  Given the lack of effective support from the state, favela communities in Río de Janeiro and São Paulo are pooling scant resources to hire round-the-clock medical support. 

Brazil’s rural indigenous communities are also particularly vulnerable, given the fact that they are often located far away from hospitals able to treat infected patients with acute symptoms.  Ironically, the first indigenous Brazilian to test positive for Covid-19 is a healthcare worker who was in contact with an infected medical doctor who was visiting a remote Kokoma community.  Researchers fear that the virus could wreak enormous destruction and havoc in communities, especially as those at highest risk – the elderly – are typically the pillars of social order and transmitters of traditional knowledge.  In response to the pandemic, many indigenous peoples are likely to disperse into small groups, according to Dr. Sofia Mendonça, a researcher at the Federal University of São Paulo. Amnesty International reports that some communities are blocking roads and going into voluntary isolation to keep the pandemic at bay.    

Amnesty notes that Brazil’s indigenous communities are facing two sorts of attacks now.  Alongside the threat of Covid-19 infections, grileiros – those that illegally appropriate land – are taking advantage of the pandemic, and the fact that indigenous communities are prevented from effectively patrolling their territories, to step up the use of indigenous lands for illegal logging, agriculture and mining enterprises.  Government protection of indigenous lands has already been severely weakened under Bolsonaro – who has sought to open up indigenous lands for outside exploitation – and indigenous leaders who resist land invaders are being threatened and killed at an increasing rate.  On March 31st, Zezico Rodrigues Guajajara, a well-known Guajajara leader and opponent of illegal logging in Araribóia indigenous lands, was assassinated.  It was the fifth murder of a Guajajara land rights advocate so far this year, according to Amazon Watch.  

The post Brazil and COVID-19: Favela Residents and Indigenous Communities Among Those Most at Risk appeared first on Center for Economic and Policy Research.



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Economy

How CEOs Are Ruining AmericaToday, America’s wealthiest business…

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How CEOs Are Ruining America

Today, America’s wealthiest business moguls – like Jamie Dimon, head of JPMorgan Chase – claim that they are “patriots before CEOs” because they employ large numbers of workers or engage in corporate philanthropy.

Rubbish.

CEOs are in business to make a profit and maximize their share prices, not to serve America. And yet these CEOs dominate American politics and essentially run the system. 

Therein lies the problem: They cannot be advocates for their corporations and simultaneously national leaders responsible for the wellbeing of the country. This is the biggest contradiction at the core of our broken system.

A frequent argument made by CEOs is that so-called “American competitiveness” should not be hobbled by regulations and taxes. Jamie Dimon often warns that tight banking regulations will cause Wall Street to lose financial business to banks in nations with weaker regulations. Under Dimon’s convenient logic, JPMorgan is America. 

Dimon used the same faulty logic about American competitiveness to support the Trump tax cut. “We don’t have a competitive tax system here,” he warned.

But when Dimon talks about “competitiveness” he’s really talking about the competitiveness of JPMorgan, its shareholders, and billionaire executives like himself.

The concept of “American competitiveness” is meaningless when it comes to a giant financial enterprise like JPMorgan that moves money all over the world. JPMorgan doesn’t care where it makes money. Its profits don’t directly depend on the wellbeing of Americans.

“American competitiveness” is just as meaningless when it comes to big American-based corporations that make and buy things all over the world. 

Consider a mainstay of corporate America, General Electric. Two decades ago, most GE workers were American. Today the majority are non-American. In 2017, GE announced it was increasing its investments in advanced manufacturing and robotics in China, which it termed “an important and critical market for GE.” In 2018, over half of GE’s revenue came from abroad. Its once core allegiance to American workers and consumers is gone.

Google has opened an Artificial Intelligence lab in Beijing. Until its employees forced the company to stop, Google was even building China a prototype search engine designed to be compatible with China’s censors.

Apple employs 90,000 people in the United States but contracts with roughly a million workers abroad. An Apple executive told The New York Times, “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible” – and showing profits big enough to continually increase Apple’s share price.

American corporations will do and make things wherever around the world they can boost their profits the most, and invest in research and development wherever it will deliver the largest returns. 

The truth is that America’s real competitiveness doesn’t depend on profit-seeking shareholders or increasingly global corporations. The real competitiveness of the United States depends on only one thing: the productivity of Americans. 

That in turn depends on our education, our health, and the infrastructure that connects us. Yet today, American workers are hobbled by deteriorating schools, unaffordable college tuition, decaying infrastructure, and soaring health-care costs. 

And truth be told, big American corporations and the CEOs that head them – wielding outsized political influence – couldn’t care less. They want tax cuts and rollbacks of regulations so they can make even fatter profits. All of which is putting Americans on a glide path toward lousier jobs and lower wages. How’s that for patriotism?

The first step toward fixing this broken system is to stop buying CEOs’ lies. How can we believe that Jamie Dimon’s initiatives on corporate philanthropy are anything other than public relations? Why should we think that he or his fellow CEOs seek any goal other than making more money for themselves and their firms? We can’t and we shouldn’t. They don’t have America’s best interests at heart — they’re making millions to be CEOs, not patriots.

Big American corporations aren’t organized to promote the wellbeing of Americans, and Americans cannot thrive within a system run largely by corporations. Fundamental reform will be led only by concerned and active citizens.



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Economy

Recessions, Bear Markets Need Time to Develop

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Is this a Dead Cat Bounce or End of the Bear market?

My method for understanding which is admittedly peculiar: I concoct a novel, often unpopular narrative whose construction yields insight into what is unfolding. It helps if this “variant perspective” is both plausible and not widely held. The less people who share this particular view, the more likely it is not reflected in market prices.

Step two considers the opposite point of view:  What if the counter to this outlook is more accurate, and the entire prior thesis is incorrect? As is so often the case, the truth may be found somewhere between these extremes.

Last week, we considered one scenario: perhaps the Coronavirus didn’t end the bull market. The drawdown is merely a counter-trend rally within a longer secular bull market; it is similar to the 1987 crash, a temporary setback within the longer 1982-2000 secular bull market. If the economy is merely experiencing a temporary contraction, once shelter-in-place orders are lifted, it will quickly recover. Pent up demand will send 330 million Americans, all with a bad case of cabin-fever, out to shop, dine, play and celebrate! Companies will rehire 10 million+ workers. The bull resumes its prior trend, eventually making new all-time highs. Happy happy, joy joy!

My colleague Batnick is somewhat incredulous about this thesis. But our investigation does not end there. Step two in our methodology is to consider the opposite position: What if the economic expansion is over, and the secular bull market is dead?

We have had prior crashes, economic collapses, and recoveries before. Winding our way through this unprecedented period of 10 million jobs lost in a month, and a 35% collapse in market prices (plus the recent 21% recovery), there is simply nothing comparable in prior experience. Pearl Harbor? Stagflation? Tech Wreck? GFC?  None are parallel, but the one commonality in these prior events is time.

These events all unfolded over a long period, both in the run up to- and the subsequent recovery from- each.

As an example, the diplomatic, trade, and economic factors that preceded the Pearl Harbor Attack, bringing the United States into World War 2, were years in the making. The 1960s and 70s bear market had multiple price shocks, high inflation and high unemployment that unfolded against a decades long malaise of the Viet Nam war and the Watergate scandal. Or consider the dotcom boom – by many measures, the market was overvalued years before the peak. The “irrational exuberance” speech  by Fed Chief Alan Greenspan was in 1996. The causations of the GFC were literally decades in the making.

Time might just be the most important, yet least well-understood aspect impacting how investors behaved during these prior market crashes.

We are pattern-recognizing creatures, looking to make sense out of a jumble of confusing and often contradictory information. Out of the chaos, the human primate confabulates a comforting narrative (as I try to do above). We are so uncomfortable with the idea that our lives are random, we desperately seek a storyline that is cohesive, understandable, and fair. We collectively lose our minds when some form of rationality is not present.

We find repeatable patterns.

Our psychology is such we keep doing what works until it no longer does. Since the end of the great financial crisis in 2009, the “Buy the dip” mentality has been amply and consistently rewarded. Every pullback has eventually led to new highs; each 10, 15, 20% drop has proven temporary, at least so far.

Traders recognize this pattern, whether it turns out to be random, temporary, or destined to eventually fail. When confronted with what trade set ups that have worked in the past, we mice run through the maze to get our pieces of cheese. This behavior is unlikely to stop until the behaviors stops getting rewarded.

Consider what traders did following the tech peak in March 2000. It took several years to see the dip buying behavior end. Before that top there was nearly two decades of new all-time highs. (Even the 1987 crash was a temporary 31% setback within the longer 1982-2000 secular bull market). When the Nasdaq peaked at 5100, the subsequent fall saw repeated recover attempts. The Nasdaq 100 Index, a popular trading ETF of the era, fell 30% from 107 to 75, rallied back 30% to 101, fell 15%, then rallied 18% to 102, before saw-toothing all the way down to a ~80% drawdown at $22 in October 2002.

Hope springs eternal among those who have been rewarded in the past for their faith. It takes time to break those money-making habits.

It is unclear if this has occurred yet.

The speed of this collapse is part of the reason why. Psychological damage that occurs in “normal” bear markets typically takes time to surface. Consider the Great Financial Crisis (GFC). U.S. equity markets peaked in October 2007; they made their final lows in March 2009. Over the course of those 18 months, investors became worn down by a relentless flow of bad news. Banks were imploding, massive layoffs were being announced, mortgage defaults were exploding. It really felt like the economic world was ending. But that did not happen in a month – it took 18 months before investor negativity turned into panic, culminating in capitulation. The definition of the word capitulation is surrender: Investors simply give up. They had to do something, anything, to stop the pain. This exhaustion of sellers is how lasting bottoms are made.

We have yet to see anything remotely like that in 2020.

The post Recessions, Bear Markets Need Time to Develop appeared first on The Big Picture.



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