Mark Blyth (2): 2011 Will Be Worse… and Life Will Go On

Mark Blyth is back in the pub tonight, played by Sean Connery, as usual, and demonstrating again how far a man can go in political economy just by talking fast and infallibly with a strong Scots’ accent.

The Democrats in Washington have taken up again their modern mission: cleaning up a Republican mess in America, for which they will get no thanks in 2011 or 2012, says our corridor mate at the Watson Institute. The Tea Party rebellion demonstrates anew that American voters are crazy but not necessarily stupid: when they see debt and deficits skyrocketing and unemployment still climbing, the Republican campaign writes itself, and wins. “You don’t get any credit for putting an emergency floor in the building when the roof is still falling into the basement. That’s what the Democrats have done for the last two years, and will keep doing.”

Mark Blyth is a man of rough opinions, as you’ve gathered, on top of learning and experience. The civilized expert world has decided, he notes, that “austerity” is to be the bad idea that governs economic policy in 2011. “If it’s not hurting, it’s not working,” is the rule. It won’t work, Blyth says. It won’t even be sustained, because democracies (like Ireland, maybe even the US) have discovered that they’re paying twice for the meltdown: first through the bank bailout, second through service cuts on the altar of the austere. Sooner or later, he says, the holders of sovereign debt will “take a haircut” but that day of reckoning could yet be years away. At the end of the day, he is telling us, the American economy has staying power that a lot of nervous Americans forget. This sounds like the Mark Blyth version of the line attributed to Bismarck, that “God has a special providence for fools, drunks, and the United States of America.” Is not the empire at risk, I am asking…

MB: It depends on what you mean by “empire,” right? This is the funny thing about American Empire. As an immigrant to the United States, along with hundreds of millions who have done it over the past hundred years, it’s this funny empire that people keep wanting to join. It’s a really weird thing. The Italians are the best at this, they got six US military bases on their soil that fly unimpeded missions to Afghanistan and God knows where else, whatever the Americans want to do, and then they come over here, probably flying Business Class to get here, and then moan about the American Empire. It’s a strange creature, this one.

CL: Some of them come here to get out of range of American foreign policy.

MB: When the British had an empire you knew where you stood. You had no rights, you had only responsibilities. We owned the stuff and you got shat on. When the French had an empire it was even clearer. This is a very odd empire where you get preferential trading agreements, better access to markets, technology transfers, and then all the sort of benefits that go along with hanging around in the dollar club. Oh, and then we’ll also do this thing called NATO where basically we’ll bankroll your militaries for 35 years and we’ll keep it going 20 years after the Cold War because it’s just a good idea. If you had to design an empire from scratch and you could do whatever you want, this would not be it. This is a seriously funny empire.

One example of this. So let’s go into Iraq for oil, right? Okay… But if you went out in 2002 and went on the spot market, and basically bought oil future contracts at about $36 a barrel, you could have bought the entire Iraqi oil stock for one quarter of what we spent on the war. This is the stupidest empire the world has ever seen. If there really was an empire, it should have fallen years ago.

Next time, perhaps: Mark Blyth on the post-bubble blues, reflecting on the ruins of the equity and tech boom (1987-1997) and then real estate and housing (1997-2007): “There’s a whole conversation we could have sometime about whether the model for investment banking is bust. I personally think it is, and it’s not coming back. So saving the banks was maybe wrong for different reasons than people thought.”

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  • karim

    With regards to buying oil on the spot market for $36 a barrel.

    I do not support the unethical wars in Iraq and Afghanistan, but I am not convinced the argument, “it would have been cheaper to buy up oil on the spot market” would hold if war had had a different outcome. Specifically, consider the case where the Americans manage to quickly gain control of, produce, and sell Iraqi oil–the case where the occupation would have been smooth.

    Additionally we must consider the drawn out time line of the Iraq war and occupation.

    Hind sight is 20-20 when considering the actions of this different, strange, and perhaps modern version, of empire.

  • Rick

    One point that was missed altogether was the MIC (Military Industrial Complex) and its MAD money. The profit motive there was probably a bigger factor in the US war making exploits. I have to believe the the MIC is probably a much more coherent influence on the world political landscape than the US State Dept.

    Other than the omission the rest of the allegorical analysis was entertaining and insightful.

    Keep up the great work.



  • Pete Crangle

    Back in the 70’s the magic went away. Who took over? Disciples of:
    Friedrich Hayek, Joseph Schumpeter, Ludwig von Mises, Peter Drucker, Karl Popper, Leo Strauss, et al. Ayn Rand should probably be on this list too. All engaged in what Jung would call a shadow dance (of epic proportions) and did the dance in various roles of teaching, writing, and wisdom dispensing. Their impact is still being felt.

    Empire note: there’s no requirement that an empire knows what it’s doing, nor is competent at being one, nor have nothing but alienated or frustrated allies. If this were the requirement then probably most empire’s would not qualify. But, let us not quibble. I really enjoyed this and the previous interview with Professor Blyth. Wonderful insights, direct colorful language. Superb conversation. Thank you to both the good professor and Mr. Lydon.

  • sifta

    The economic analysis aligns with the “secular trends” identified by PIMCO’s Mohammed El-Erian — i.e. towards emerging markets, towards non-market hard assets, etc. The Ron Paul types characterize the situation as a game of hot potato where the last holders of US bonds and dollars (i.e. typical American citizens) will be the losers. Blyth’s “Austerity” formulation is aligned with this and including a reduction in wealth redistribution as well, which makes it even more compelling.

    Listening to Blyth on the more sentimental stuff, though, you might wonder what Chris Hedges and Bill Moyers are babbling about… Perhaps relative to cynical and idiotic European stereotypes, America looks just fine. On the other hand, relative to American so-called ideals, not so much. “Be careful what you pretend to be because you are what you pretend to be.”– Kurt Vonnegut.

  • EDA (a guy)

    Haven’t listened yet, but I look forward to it. Has anyone seen that article at commondreams re the big high due to more open water in the artic? I fear the “planning” required would be more meticulous than any socialism that has come down the pike thus far (resources dedicated wherever to augment quickest sustainable survival means). As the little cog that I am I say bring on the next Civil Wks Administration. Most things Americans need to learn are relationships in the macro world. Every big hedgefund has its own gargantuan map of interconnected economic realities, but EVERYTHING in media talk continues to ignore the fact that avg people need another circular flow chart. The hedgefunds get’em but the people don’t. If just 12% of the big loss got things going…then if Americans could agree on some some kind of BOND very much like Working Assets instruments, then maybe that would wk. But Americans have to know that the dough is going not to scam contractors but to a super fast implementation of sustainable infrastructure…just like FDR and Hopkins set in motion. To agree…they gotta be informed. This is not so far fetched…for, in reality, isn’t this what ROS is trying to do via Blyth? Hey, nobody get on my idealistic case…cause this is what YOU are trying to do. And I thank you. Merry Christmas!

  • EDA (a guy)

    Ah, Freudian slip above perhaps. Most likely my solution didn’t sufficiently address Rick’s MIC. ROS’ Pakistani guys were really informative, but seems to me any continued presence will heighten blowbk. If the world sees we’re standing down AND going sustainable, maybe that’ll lessen it. Look at all these 350s made out of bodies all over creation.

    What’s wrong with Popper?

    Again….Merry Christmas

  • Potter

    His Scottish accent is thicker than my Irish Oatmeal (Scottish oatmeal I recently discovered is different, finer!) and when I add that to trying to understand economic theory I need that glass of ( Scottish) whiskey that Mark Blyth recommends in order to wash it down. So I lift my glass to toast Chris and Mark for the levity of the interview and also to toast the rewind button on my Ipod ( which I seriously needed this time).

    Great points were made about China and India- China presently being the equivalent of 2 Germanys economically with it’s “skewed income distribution” and India dependent on other nations to continue their boom in supplying services while both have enormous poor populations.

    He mentions what I have been noticing: authoritarian governments have an advantage in being to act quickly whereas our troublesome democracies (cum plutocracy here) cannot impose the discipline or the ( old fashioned) sense of the common on ourselves for long before we and corporate interests “throw the bums out”. It’s sad to think that we have to rely on an undemocratic China to save the planet.

    Also I appreciate Blyth’s pushback about the US empire but I think, for instance, our NATO involvement and our “coalitions of the willing”, are about control. This seems to be fine with our enablers abroad and increasingly less so fine with us at home for the costs, moral and financial. It may be that the US (our cultural arrogance and the military industrial complex) stands in the way of the UN truly becoming a world government it idealistically should be with the necessary power to act and impose penalties on any rogue state, including the US.

    Blyth says we here are seen from abroad us as “300 million fat ill-educated borderline dipsomaniac diabetic n’ diabolical lyin’ on the couch watchin’ Fox news an’ consumin’ the planet to death” Isee us increasingly this way too.

    The mention of Gramsci reminded me that I want to know more about him- so another toast (and donation) to Wikipedia.

    And here’s to an interesting year. Please invite MB down the hall again to sober us up.

    video linked below the picture)