The 1% won a counter-revolution while we played. We forgot that we are America’s crew, not passengers.

Summary: Now inequality has become too extreme to ignore and the 1% has crushed all opposition, we begin to see the results of their successful counter-revolution. But we do not yet see the hidden struggle that brought the 1% back to power, and cannot yet see how to reform America. Until we see these things others will control our future. Here’s a first step to doing so, stepping outside the approved narrative to see America.

The Universe was 5 miles long, and 2,000 feet across. Men scoffed at the legends of such things as stars, or the demented idea that the Ship was moving… for the Ship was the Universe, and there could be nothing outside. Then one man found his way into a forgotten room, and saw the stars – and they moved…

— Summary of “Orphans of the Sky” by Robert Heinlein (1951), one of the first stories about a generation ship traveling to the stars. Like them, we are a crew on an endless journey — who have forgotten who we and where we are.

Somewhere in our future lies the Third Republic

(1)  A recap of the plot so far

During the long halcyon days of the post-WW2 summer America forgot about economic/social classes — and their cousin, social mobility. The reforms of the New Deal, the post-WW2 social programs (especially the GI bill, the ample funding to education (from primary to graduate-level), the civil rights legislation, and sustained growth of GDP and wages — these fertilized the rise of a middle class and provided a modest degree of social mobility.

We came to consider that social order to be our due as Americans. We came to consider the America of the post-WWII era as the true America — not what it actually was, a hard-won victory after generations of oligarchy.

All this culminated with the long boom — the debt-fueled expansion from 1982 – 2000, the fall of the Berlin Wall in 1989 and the late 1990’s tech boom. America was exceptional, a new moment in history. Marx became a comic figure. “The only Marxists live in Berkeley and Albania.”

We forgot the century-long struggle that laid the political foundations for the middle class, a slow low-violence revolution.  That meant we forgot that this was an unnatural state requiring work to maintain. We forgot we were the officers and crew of America, not passengers on the Love Boat.

But not everybody was happy with summer, and the core New Deal and civil rights reforms with made it possible.  They planned a counter-revolution. They had patience, long-vision, and vast resources.

(a)  Starting with Goldwater, the Republican Party’s “Southern Strategy” slowly returned the antebellum ideologies of racial separatism, States Rights, etc — to break the New Deal coalition, forging an instrument to wage the counter-revolution. There was no plan, just a “run to daylight” strategy of exploiting the internal contradictions and discontents that triumphant liberals had allowed to develop in their coalition.

(b) The Powell Memorandum: Sent by Lewis F. Powell, Jr. on 23 August 1971 (2 months before his nomination to Supreme Court) to Eugene B. Sydnor, Jr., Chairman of the Education Committee of the U.S. Chamber of Commerce. Titled Attack On American Free Enterprise System, it outlined a strategy for large corporations to rollback much of the New Deal reforms on business and crush the unions (perhaps the key brick in the New Deal coalition and the middle class structure).

(c) The article creating the mythology of tax-cuts as the magic elixir: “Taxes and a Two-Santa Theory“, Jude Wanniski, National Observer, 6 March 1976

(d) In his 14 July 1978 testimony to Congress (9 years before becoming Fed Chairman), Alan Greenspan first described the “starve the beast” strategy: “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending.”

The great New Deal coalition built a new America. But the flower children of the boomer generation forgot that they were in a vessel. They thought they were frolicking in a meadow. Their political activism was limited to groups working to benefit themselves — such as ending the draft, opening the work world to women, rights for gays. These are issues the 1%, as a class, don’t care about. Nobody bothered with the boring work of staffing the engine and control rooms, and running the ship.

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Let’s reflect on the course of the US economy. Not a pretty picture.

Summary: The monthly employment report provides the opportunity to look at the New America being built on the ruins of the own. While seldom remarked, it clearly appears in the data. Also, we take a moment to reflect on the purpose and operation of the FM website.

Better days are here, for some of us.

“Big industry constantly requires a reserve army of unemployed workers for times of overproduction. The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it …”
— Marx (1847, unpublished work)

“Taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army …”
— Marx, Das Kapital (1867)

One of the goals of the FM website is too provide its readers with a different perspective on events.  We do this by presenting information, reporting expert analysis, and the occasional prediction. Hopefully this helps you see our complex and changing world more clearly than relying solely on mainstream sources.

Looking at the economy shows how this works. For the past 3 years I have shown that the widespread claims that the recession had not ended were false. I predicted that forecasts of an imminent return to post-WW2 average growth were likewise false.

The monthly employment reports show this alternative perspective at work in another way. Each month brings a tide of forecasts.  Boom!  Bust!  And analysis of the report is similarly dramatic. That’s how newspapers are sold and website traffic grows. It is, however, quite fallacious. Each month we duly and dully report that nothing has changed. Just more slow growth. As seen in this graph of monthly percent changes in the number of jobs (YoY, NSA). Steady, slow:

FRED: CES-short


As usual, let’s put this in a longer-term context. Job growth has stabilized at an unusually low level. Also note how the business cycle was tamed after 1982. The magic ingredient: rapid debt growth. Being used today, but most aggressively by the Federal government. Without this fiscal stimulus we probably would look like Europe, and there would be fewer stories about America Ascendent.

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Krugman discovers the Robot Revolution!

Summary:  One of the great challenges of the 21st century will be managing the next wave of automation. This rise in productivity can make us richer, create feudal-like inequality, or spark massive social conflict. The result depends on our decisions. The first step, as always is problem recognition. Today we took another small step forward.



An increase in the productivity of labour means nothing more than that the same capital creates the same value with less labour, or that less labour creates the same product with more capital.
— Karl Marx, Notebook IV of A Contribution to the Critique of Political Economy (1857/58)

Slowly more people become aware of the coming Robot Revolution, the next wave of automation. Now it’s Paul Krugman’s turn: “Rise of the Robots“, New York Times, 8 December 2012:

On the other hand, it’s not good news for workers! This is an old concern in economics; it’s “capital-biased technological change”, which tends to shift the distribution of income away from workers to the owners of capital.

Twenty years ago, when I was writing about globalization and inequality, capital bias didn’t look like a big issue; the major changes in income distribution had been among workers (when you include hedge fund managers and CEOs among the workers), rather than between labor and capital. So the academic literature focused almost exclusively on “skill bias”, supposedly explaining the rising college premium.

But the college premium hasn’t risen for a while. What has happened, on the other hand, is a notable shift in income away from labor:

Krugman, NYT, 8 Dec 2012
Krugman, NYT, 8 Dec 2012

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The breakdown of the American political system, pointing to a new and better future

Introduction:  This is the second in a series of dashed off speculative opinions.  Normal procedure on the FM website for these topics would be 3 thousand word posts, supported by dozens of links.  I dont’ have the time to finish them, and too many of these outlines have accumulated in my drafts file.  Perhaps these will spark useful debate and research among this site’s readers. 

The American system is breaking up.  The more or less clear lines dividing left from right have blurred into incoherence.  This opens the way for new solutions offering real reform.


  1. Does anti-war mean liberal?  Does pro-war mean conservative?
  2. America tests liberal and conservative solutions
  3. What comes next?
  4. For more information from the FM site and an Afterword

(1)  Does anti-war mean liberal?  Does pro-war mean conservative?

Our wars most clearly show the collapse of the traditional divisions.

  • Hillary Clinton, painted as radical leftist by many conservatives, vehemently supports our current wars.  President Obama, also painted as a radical by the right, strongly supports the Af-Pak war.
  • Patrick Buchanan and William Lind (longtime head of the Center for Cultural Conservatism) oppose our current wars. As does Andrew Bacevich (Colonel, US Army, retired, bibliography here), who describes himself as a Catholic conservative and publishes in American Conservative magazine.

Another perspective on this:  Stratfor looks at Obama’s foreign policy, sees Bush’s foreign policy, 30 August 2009.

(2)  America tests both liberal and conservative solutions

For a clear and provocative analysis of what went wrong with America during the past decade, see “System Failure“, Christopher Hayes, The Nation, 1 February 2010 —  We (the voters) performed a simple test.   Hayes describes the results which are not what either side expected.   Excerpt:

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Niall Ferguson, poet-laureate of the American Empire

“Hegel says somewhere that all great historic facts and personages occur twice, so to speak. He forgot to add: “Once as tragedy, and again as farce.”
— Opening line to Karl Marx’s The Eighteenth Brumaire of Louis Bonaparte (1869)

The unofficial poet-laureateof the British Empire was Rudyard Kipling.  He described its contradictions, wonders, and horrors with penetrating insight and beauty.

Ours is a coarser society than England’s, more concerned with wealth and bureaucratic forms.  Rather than a poet, our poet-laureate is Niall Ferguson — Scottish professor of history and business administration at Harvard.  Brilliant, he writes nonsense  about our Empire with style and knowledge.  No Hollywood Central Casting staff could do better.

This post excerpts articles looking at a tiny sliver of his work (the non-imperial majority is excellent).  I strongly recommend reading these, which nicely highlight the nature of America’s Empire.  It’s bizarre pretensions and sand-like economic foundation.  Even more important, the degree of ignorance — willful ignorance of historical fact and economic theory — required to believe in it.  Today’s featured reading is…

In the following we see Ferguson reiterating many of the tenants of economics believed today by many conservatives.  Some of this makes sense, much does not.  I recommend reading this fascinating discussion. 

  1. The Crisis and How to Deal with It“, a symposium on the economic crisis presented by The New York Review of Books and PEN World Voices. Speakers Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells.
  2. Another excerpt of remarks by Ferguson, posted at Brad Delong’s website
  3. Liquidity preference, loanable funds, and Niall Ferguson, Paul Krugman, at the blog of the New York Times, 2 May 2009


From “The Good Empire – Should we pick up where the British left off?“, Vivek Chibber, Boston Review, February/March 2005:

Not too long ago, it was difficult to find mention of empire in American intellectual circles, save in discussions of bygone eras or, more commonly, of the Soviet Union’s relation to its satellites. The steady stream of U.S. interventions in countries around the globe could not, of course, be denied; but they were commonly explained as defensive responses to Soviet or Chinese imperialism—as efforts to contain Communist aggression and protect our way of life. But America itself could not be cast as an imperial power.

Times have changed. America and empire are joined at the hip in political discourse, not just on the Left but also in visible organs of the Right. The United States is often described as an empire and proudly proclaimed to be in the company of the best, outshining its English predecessor and catching up withthe standard-setting Romans.‚This semantic shift was not instantaneous. In the immediate aftermath of the Eastern Bloc’s demise, the terms most typically used to describe American supremacy were more benign — sole superpower, new hegemon, and so on.

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America is changing. Read some chillling words from a liberal economist

The crash of the post-WWII debt supercycle will ripple out though our society in ways we cannot now imagine.  There are a few who can grasp the trend of events and see what lies ahead. 

Like this article by Brad Delong, economics professor at Berkeley:  “Today in Financial History“, posted at his blog Grasping Reality with both hands, 29 September 2008. I strongly recommend reading this.  It gives a valuable if somewhat long and technical analysis of our situation.  More important are his conclusions, of special significance because the Obama administration will hire either DeLong or others like him.  So his analysis is academic speculation, but not just academic speculation.

He concludes with some chilling words.

Five more notes:

First, last spring Larry Summers had good arguments that we had then set in motion enough policy moves to resolve the crisis and save the world economy from depression. We had implicitly guaranteed the unsecured debt of every large investment bank in the United States. And we had greatly strengthened the implicit guarantee of Fannie and Freddie. That should have been enough. But clearly it wasn’t.

Second, I don’t believe that after this the price of risk will ever again become a free-market price, just as after the Great Depression the short-term price of liquidity–the short term interest rate–ever became a free-market price. The federal government, in one form or another, is going to be in the business of insuring debt securities against steep declines in value. Securities that are not so insured will simply not be traded. What Fannie Mae did for “conforming” home loans, the Treasury or some other government agency will do for derivative securities. It will offer insurance, charge for that insurance, and supervise and oversee financiers much more strictly.

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Why do we lose 4th generation wars?

Summary:  This post examines one of the best and most influential articles written to guide our Middle Eastern Wars, using it to illustrate serious — perhaps decisive — flaws in our thinking.  Not just our strategic thinking, but the very way we see the world.  On this site “we” usually means America, but in this case it means the West — since the article in question was written by an Australian.   This is part 4 in a series; links to the other chapters appear at the end.


This pitiful little vignette shows one reason why we lose: structural failures in the Department of Defense, from “Knowing the Enemy“, George Packer, The New Yorker, 12 December 2006:

“In 2004, when McFate had a fellowship at the Office of Naval Research, she got a call from a science adviser to the Joint Chiefs of Staff. He had been contacted by battalion commanders with the 4th Infantry Division in a violent sector of the Sunni Triangle, in Iraq. “We’re having a really hard time out here-we have no idea how this society works,” the commanders said. “Could you help us?” The science adviser replied that he was a mathematical physicist, and turned for help to one of the few anthropologists he could find in the Defense Department.”

Among the thousands of support people in DoD, a battalion commander found nobody better to help understand Iraq than a mathematical physicist. A science adviser to the Joint Chiefs found no better expert on the Middle East than an anthropologist with no specific expertise in that area.

From this a logician could infer the full story of America’s inability to successfully wage 4th Generation Wars (4GW), just as from a drop of water “a logician could infer the possibility of an Atlantic or a Niagara without having seen or heard of one or the other” (Sherlock Holmes in “A Study in Scarlet,” part 1, chapter 2).  However, logicians are rare. For the rest of us, here is a brief attempt to explain one of the great puzzles of our time: why the US has lost – is losing – and will continue to lose – 4th Generation Wars (4GW).


  1. Introduction
  2. The Two Forms of 4GW
  3. Article #1 – Know your turf
  4. Article #2 – Diagnose the problem
  5. Article #3 – Organize for intelligence
  6. Article #10 – Be there
  7. Kilcullen’s expectations for our company commanders
  8. Being rational about irrational things
  9. Are we liberators — or conquering a colony?
  10. Conclusion
  11. For more information

(1)  Introduction

An early symptom of impending defeat is loss of confidence in one’s tactical doctrines. In a strong military culture, though, this can spark a burst of creativity. In WWI, this resulted in the perfection by the German Army of infiltration tactics. Later, with new technology, this became blitzkrieg.

How has the prospect of defeat in Iraq affected the US military?

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