Brooks and Krugman

Sorry for the lateness.  Been a bit under the weather.  Today Bobo says “We Take Care of Our Own,” and that the phrase has two meanings, and that difference is at the center of election 2016.  Prof. Krugman, in “Bull Market Blues,” says in some ways, the stock market’s gains reflect economic weaknesses, not strengths.  Here’s Bobo, to be followed by a response from “gemli” in Boston:

A few years ago, Bruce Springsteen came out with a song called “We Take Care of Our Own.” The chorus’s theme seemed upbeat and proud: We take care of the people closest to us. But like in a lot of Springsteen songs (including “Born in the U.S.A.”), the lyrics in the verses sit in tension with the lyrics in the chorus.

In the verses, it’s clear that taking care of our own also means not taking care of people who are not our own, like the victims of Katrina. Suddenly the phrase “We Take Care of Our Own” has an exclusivist, menacing and even racist tinge.

That phrase and the two different meanings it can have sit at the center of election 2016.

Donald Trump’s supporters stand for the first meaning. America’s first loyalty is to its own workers, its own culture, its own citizens.

This worldview is not just selfishness. For most of human history most people have prized coherent communities above all. They’ve built moral systems on loyalty and support for their own kin and fellow citizens. These bonds are not based on some abstract social contract. They are intimate bonds, born out of shared kinship, history, geography and common understandings of right and wrong.

People committed to coherent communities will fight to defend the norms that hold communities together. They accept immigrants who assimilate to existing culture, but they’ll be suspicious of those who they feel bring in incompatible customs and tear at the social fabric.

For eons, this was more or less the traditional moral system for most of the human race. But as the N.Y.U. social psychologist Jonathan Haidt points out in an outstanding essay in The American Interest, over the past several decades a different mind-set has emerged.

People with this mind-set value the emancipated individual above the cohesive community. They value, or at least try to value, self-expression, social freedom and diversity. Their morality is not based on loyalty to people close to them; it’s based on a universal equality for all humans everywhere.

People with this mind-set disdain the political or religious walls that divide people. In his essay, Haidt cites John Lennon’s song “Imagine” as an expression of this worldview:

Imagine there’s no countries; it isn’t hard to do
Nothing to kill or die for, and no religion too
Imagine all the people living life in peace
You may say I’m a dreamer, but I’m not the only one.

People with this mind-set bridle at the exclusivist implications of the line “We Take Care of Our Own.” It’s fine to value Americans, but we should also take in the immigrant and be multilateral in our foreign relations.

Haidt argues that the division between these two camps is a division between the nationalists and the globalists. It’s also between the moral particularists and the moral universalists, between those who believe that blood and historic ties take precedence and those who, like the philosopher Peter Singer, argue that you have the same moral obligation to a boy starving to death in South Sudan as to a boy drowning in the lake in front of you.

For decades the globalist/universalist mind-set — pro-immigration, pro-globalization — has been on the march. Now, with Trump, the particularists are striking back. Immigration is the subject that fuels their ire.

As Haidt writes, “By the summer of 2015 [when the Syrian refugee crisis hit] the nationalist side was already at the boiling point, shouting ‘enough is enough, close the tap,’ when the globalists proclaimed, ‘let us open the floodgates, it’s the compassionate thing to do, and if you oppose us you are a racist.’ Might that not provoke even fairly reasonable people to rage?”

The fact is that both mind-sets have their virtues. The particularists emphasize the intimate love and loyalty that is the stuff of real community. The universalists are moved by injustices anywhere, and morally repulsed by inaction and indifference in the face of that suffering.

The tragedy of this election is that America already solved this problem. Unlike France and China, we were founded as a universalist nation. You can be fiercely patriotic and relatively open because America was founded to take in people from around the globe and unite them around something new.

Unfortunately, the forces of multiculturalism destroyed that commitment to cultural union. That has led to Trump, who has upended universalistic American nationalism and replaced it with European blood and soil nationalism in a stars and stripes disguise.

The way out of this debate is not to go nationalist or globalist. It’s to return to American nationalism — espoused by people like Walt Whitman — which combines an inclusive definition of who is Our Own with a fervent commitment to assimilate and Take Care of them.

Now here’s what “gemli” has to say to Bobo:

“Since when do we take care of our own? The history of America has been one of embracing the idea of equality while carefully building walls to isolate and punish the undesirables. It’s ironic that while we were proclaiming that all men are created equal we were simultaneously wiping out the Native Americans.

Women aren’t really our own. They were grudgingly allowed to vote in 1920, and a few weeks ago it was decided that states couldn’t close clinics just to deny them the right to a legal abortion that they had been granted in 1973. But I get the feeling it’s not over yet.

People from Africa were made reluctant Americans, and since then we’ve been reluctant to call them our own. Even after a smart, poised and decent African-American man became president, they have to remind us that they don’t like being economically abandoned, imprisoned and shot at traffic stops.

God help the gays. They are most certainly not our own. In fact, they’re nobody’s. Same-sex unions are now permissible, so they can be reviled as couples instead of individually. In America, that counts as progress.

Imagine no religion. Good luck with that. For all the walls we build, the one between church and state is the flimsiest. For the entire 6,000 years since God created the earth, religion has been nothing but trouble. Atheists are not our own.

We tend to “take care” of our fellow Americans the way that mob bosses take care of troublesome rivals. With extreme prejudice.”

And now here’s Prof. Krugman:

Like most economists, I don’t usually have much to say about stocks. Stocks are even more susceptible than other markets to popular delusions and the madness of crowds, and stock prices generally have a lot less to do with the state of the economy or its future prospects than many people believe. As the economist Paul Samuelson put it, “Wall Street indexes predicted nine out of the last five recessions.”

Still, we shouldn’t completely ignore stock prices. The fact that the major averages have lately been hitting new highs — the Dow has risen 177 percent from its low point in March 2009 — is newsworthy and noteworthy. What are those Wall Street indexes telling us?

The answer, I’d suggest, isn’t entirely positive. In fact, in some ways the stock market’s gains reflect economic weaknesses, not strengths. And understanding how that works may help us make sense of the troubling state our economy is in.

O.K., let’s start with the myth Samuelson was debunking, the claim that stock prices are the measure of the economy as a whole. That myth used to be popular on the political right, with prominent conservative economists publishing articles with titles like “Obama’s Radicalism IsKilling the Dow.”

Strange to say, however, we began hearing that line a lot less once stock prices turned around and began their huge surge — which started just six weeks after President Obama was inaugurated. (But polling suggests that a majority of self-identified Republicans still haven’t noticed that surge, and believe that stocks have gone down in the Obama era.)

The truth, in any case, is that there are three big points of slippage between stock prices and the success of the economy in general. First, stock prices reflect profits, not overall incomes. Second, they also reflect the availability of other investment opportunities — or the lack thereof. Finally, the relationship between stock prices and real investment that expands the economy’s capacity has gotten very tenuous.

On the first point: We measure the economy’s success by the extent to which it generates rising incomes for the population. But stocks don’t reflect incomes in general; they only reflect the part of income that shows up as profits.

This wouldn’t matter if the share of profits in overall income were stable; but it isn’t. The share of profits in national income fluctuates, but it has been a lot higher in recent years than it was during the great stock surge of the late 1990s — that is, we’ve had a profits boom without a comparably large economic boom, making the relationship between profits and prosperity weak at best. We are not, in fact, partying like it’s 1999.

On the second point: When investors buy stocks, they’re buying a share of future profits. What that’s worth to them depends on what other options they have for converting money today into income tomorrow. And these days those options are pretty poor, with interest rates on long-term government bonds not only very low by historical standards but zero or negative once you adjust for inflation. So investors are willing to pay a lot for future income, hence high stock prices for any given level of profits.

But why are long-term interest rates so low? As I argued in my last column, the answer is basically weakness in investment spending, despite low short-term interest rates, which suggests that those rates will have to stay low for a long time.

This may seem, however, to present a paradox. If the private sector doesn’t see itself as having a lot of good investment opportunities, how can profits be so high? The answer, I’d suggest, is that these days profits often seem to bear little relationship to investment in new capacity. Instead, profits come from some kind of market power — brand position, the advantages of an established network, or good old-fashioned monopoly. And companies making profits from such power can simultaneously have high stock prices and little reason to spend.

Consider the fact that the three most valuable companies in America are Apple, Google and Microsoft. None of the three spends large sums on bricks and mortar. In fact, all three are sitting on huge reserves of cash. When interest rates go down, they don’t have much incentive to spend more on expanding their businesses; they just keep raking in earnings, and the public becomes willing to pay more for a piece of those earnings.

In other words, while record stock prices do put the lie to claims that the Obama administration has been anti-business, they’re not evidence of a healthy economy. If anything, they’re a sign of an economy with too few opportunities for productive investment and too much monopoly power.

So when you read headlines about stock prices, remember: What’s good for the Dow isn’t necessarily good for America, or vice versa.


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