Saturday, May 4, 2024

Victor Grossman: HUMBOLDT AND GAZA


Berlin Bulletin No. 222   May 4 2024

Victor Grossman, Berlin                    


No books were burned this time in early May. But there were ironic parallels, some all too alarming!

It was May 10th in Germany's terrible year 1933, Hitler had been in power for hardly three months, when students and staff emptied the university libraries of forbidden books and threw them, an estimated 20,000 books by over a hundred authors, into the flames of a giant bonfire. Most authors were German - Jewish, atheist, liberal, leftist, Bertolt Brecht, Anna Seghers, Sigmund Freud and  Magnus Hirschfeld, but also some foreign works were thrown into the flames – Maxim Gorki, Hemingway, Jack London, Dos Passos.

Ninety-one years later, this May 3rd, just across Berlin's famous Unter den Linden boulevard and in the same university courtyard where those books had once been dragged from, some of today's students – courageous, determined, the total opposite of the Nazis of 1933 - were forcibly hauled away to waiting police vans. The students of 1933 were advocating murder, preparing for the genocide which was to follow. These students of 2024 are protesting against murder and genocide.

The mayor, the authorities claimed that forbidden Hamas slogans were called out, justifying their brutal cuffing and arrests. It is possible that some Arab participants, emotionally moved by news and the pictures from Gaza, may have generalized these feelings. Who knows? And does it matter? This group was not anti-Semitic; it also included Jewish students, a few of them Israeli exiles. The spirit of these first three hundred demonstrators, as in similar scenes at other colleges and universities in Germany and other countries – and so very courageously all over the U.S.A. - was directed against destruction worse than any since 1945, of homes, mosques, churches, libraries, schools and universities in Gaza and against the killing of over 35,000 human beings, a majority of them women and children, and the physical and psychical maiming of so many more.

But these demonstrations, now growing rapidly in number, were more than that. For many they also expressed protest at the entire scene now engulfing Germany, and not only Germany. Hatred is in the air, with century-old feelings of superiority over "inferior" people, growing pressure to build ever more destructive weapons and prepare to use them – always, of course "in justified self-defense," whether in Gaza, in Lithuania, Estonia or for blockades against human beings at frontiers in Texas, Arizona or along Mediterranean seashores. And with this hatred there were mounting pressures for conformity. Don't rock the boat – or else! Such trends are gaining strength, aiming at the accession of total power, and not only with the obviously far-right groups! For so many of the proper, accepted leaders have ties with the billionaire profiteers thrilling at new conflicts and more mansions, jets, yachts.

It is the new spirit of protest against these trends, the hunt for new answers, which has dominant circles worried, even fearsome. That is why they send police into Hind's Hall or the courtyard of Humboldt University. Sometimes they prevail and can break resistance, sometimes local victories can be won. But it is the long-awaited movement which counts, and its match-up with equally courageous workers at auto plants, at Walmart or Starbuck shops or in Central Africa and Central America.

There is an added irony; the site of Friday's protest was the courtyard of Humboldt University in East Berlin, given that name soon after the defeat of the Nazis and the liberation of Berlin by the Red Army on May 8th 1945. Looking down upon today's fighters is the statue of  Alexander von Humboldt, a great scientist and explorer, who ardently opposed the slavery he saw in Latin America and the U.S.A. in the 1820s - and oppression everywhere. A worthy patron. And inside the handsome building (where Albert Einstein once taught) and despite many changes in the university's character over the years, one sentence has been saved, in golden letters above a wide central staircase. It was written by another famous man, who once studied here, and it might also be considered as very relevant. The author was none other than Karl Marx. The words were: "Philosophers have hitherto only interpreted the world in various ways; the point, however, is to change it." Perhaps it is fear of the revival of such a spirit which has caused the mayor and many politicians to become so angry and worried and to send in the police.  Let us hope the better analogies are models, not the frightening ones!

Thursday, April 11, 2024

Dean Baker: Profits Are Still Rising, Why Is the Fed Worried About Wage Growth? April 3

Dean Baker:  Profits Are Still Rising, Why Is the Fed Worried About Wage Growth?

I was more than a bit surprised to see the profit data this morning. I really did believe that the profit surge during the pandemic was a one-off, associated with supply-chain issues.

We can argue about how much of this increase was a predictable story, where profits rise due to shortages, and how much was about companies exploiting market power to jack up prices, but the fact that profit shares increased is not disputable. In any case, it was reasonable to expect that profits would return to their pre-pandemic shares after supply chains returned to normal.

That doesn’t look like what is happening, as shown below.

Source: BEA and author’s calculations, see text.

The profit share of corporate income rose to 26.8 percent in the fourth quarter from 26.3 percent in the third quarter. That is down only 0.5 percentage points from its pandemic peak of 27.3 percent in the second quarter of 2021 and well above the 24.3 percent average for 2019.[1]

This rise in profit shares really should have the Fed rethinking its inflation-fighting strategy. It is certainly true that the 6.0 percent rate of wage growth at the end of 2021 and start of 2022 was inconsistent with the Fed’s 2.0 percent inflation target. However, the current rate of roughly 4.0 percent is obviously consistent with the Fed’s target, if it is allowing companies to increase their profit share. This implies that we should actually want to see a somewhat more rapid pace of wage growth, unless we think profit shares need to be increasing indefinitely.

There are a couple of important qualifications here. First, we saw extraordinary productivity growth in 2023. Clearly corporations were the main beneficiaries of this growth. If this uptick was an aberration and we revert to something closer to the pre-pandemic growth rate, then profit shares may not continue to rise with a 4.0 percent pace of wage growth and could even edge back somewhat.

The other big qualification is that there is a large and unusual discrepancy between GDP measured on the income side and GDP measured on the output side. In principle these sums should be identical, but in a $28 trillion economy, they never come out exactly the same.

In recent decades, the income side has generally been about 0.5 percentage points higher than the output side. In the fourth quarter, the income side was 2.0 percentage points lower. We usually assume that the true figure lies somewhere between the two measures.

This would imply that the true sum of wages and profits is 1.0 to 2.0 percentage points higher than what is now reported. If that gap ends up being disproportionately wages or profits it could change the picture somewhat, but even if the full 2.0 percentage points all ended up being wage income it would not change the fact that the profit share is still far above its pre-pandemic level.  

The upshot is that it really is time for the Fed to declare “Mission Accomplished” and take its foot off the brake. If profit shares are rising, there is no reason for it to be trying to slow wage growth.   

[1] These figures take Line 8 (net operating surplus) from NIPA Table 1.14, minus Line 11 (Federal Reserve Bank profits) from Table 6.16D divided by Line 8 plus Line 4 (labor compensation) from Table 1.14.

Corporations can't be beat for their ability to take advantage of our "democratic" system, where political contributions snowballs to more regulation relaxing that helps them make more and make larger contribution. A nice vicious cycle against the little guy. Average citizens, with hand-to-mouth incomes don't stand a chance to be heard . It is rigged, or should we say, it was born rigged and will remain so until it dies from bloat. Now that our justice system is acting a lot more like the political system and let each other off the hook for bribery, the bloat is accelerating. Good or bad, history's beat goes on.