The Terrible Unemployment Figures of March 2013

by Robert Oak | The Economic Populist

The BLS employment report shows the official (U3) unemployment rate ticked down 0.1 percentage point to 7.6%, but not because people gained employment.   Instead the unemployment rate dropped due to less people participating in the labor market.  The labor participation rate just hit a record low, not seen since May 1979 when many segments of the population was still quite discriminated against in the workforce.   One cannot just blame retiring baby boomers for low labor participation rates  This article overviews and graphs the statistics from the Current Population Survey of the employment report.   Below is a graph of the official unemployment rate.

The labor participation rate dropped 0.2 percentage points to 63.3%, mentioned above.

The labor participation rate is at artificial lows, where people needing a job are not being counted.  A drop isn't good actually for it means that those who dropped out of the labor force are staying out of the labor force.  For those claiming the low labor participation rate is just people retired, we proved that false by analyzing labor participation rates by age.

The number of employed people now numbers 143,286,000, a -206,000 monthly decline.  We describe here why you shouldn't use the CPS figures on a month to month basis to determine actual job growth.  These are people employed not actual jobs.   In terms of labor flows, the employed has been static for the last six months, a decline of 42,000 employed since October 2012.  From a year ago the employed have risen 1.266 million, but bear in mind the noninstitutional population has also increased by 2.391 million during the same time period.  The statistics from the CPS generally vary widely from month to month.   Below is a graph of the Current Population Survey employed.

Those unemployed stands at 11,742,000, a decline of -290,000 from last month.  Below is the change in unemployed and as we can see, this number also swings wildly on a month to month basis.

The number of people counted as unemployed has also remained fairly static.  From a year ago the official unemployed as declined by -944,000. , For the last six months, the unemployed has dropped by -506 thousand people.  Yet from the employed levels we can see these people are going into not in the labor force instead of getting a job.   Below is a graph of the unemployed.

We want to show a historical graph of the unemployed going back to 1948.  This is just ridiculous.  The number of official unemployed stands at 11,742,000.  In November 1982, the unemployed was 11,938,000.  That is over 30 years ago, during the 1980-1982 recession, and the civilian noninstitutional population has increased by 76.3 million people since then.  Congratulations America, over five years past the official end of the recession the jobs crisis is still worse than it was during the height of the 1980-1982 recession.

Below is a graph of those considered employed, in maroon, scale on left, against those considered unemployed, in blue, scale on right, by the BLS methods.  It is only recently that the growth rate of the employed has exceeded the growth rate of the unemployed (the maroon line exceeding the blue line).

The civilian labor force, which consists of the employed and the officially unemployed, is now at 155,028,000.  This is a decline of -496 thousand from last month.    Notice in the graph below how many more people are in the labor force than at the start of the 2008 recession. Population increases every month and this post gives details on that increase, while this one describes BLS labor concepts as well as how many jobs are needed just to keep up with the increased population (.

It's fairly clear the American workforce is ending up in the not counted statistics.  Those not in the labor force now tallies to 89,967,000, an increase of 663,000 from last month.   Below is the change to show on a month to month basis, the CPS shows quite a bit of variance. We talk about the wild monthly CPS changes in this post.

Below is a graph of the civilian labor force, in maroon, scale on left, against those not in the labor force, in blue, scale on right.  Notice how those not in the labor force as a trend exceeds those considered employed and unemployed.  What we see is a never ending growing segment of the population that is considered neither employed or unemployed, i.e. not in the labor force, increasing, above the trend line of those who would be naturally dropping out, such as the retired and those in school. This is the god awful, terrible aspect of this report.  Once again we see a huge segment of the U.S. population that could be working or looking for work laying idle.  Not in the labor force does include retirees, yet clearly 663 thousand baby boomers did not just magically retiree in a month.

Those considered employed as a ratio to the total Civilian noninstitutional population stands at 58.5%, a -0.1 percentage point drop from last month.  This ratio hasn't been this low since August 1980, as shown in the graph below.   This implies there are many people who could be part of the labor force who are not anymore.

A huge problem with today's labor market is the gross number of working part-time generally.  There are a huge number of people who need full-time jobs with benefits who can't get decent career oriented positions.  Those forced into part time work is now 7,638,000, and drop of -350,000 from last month.  While still a hell of a lot of people are stuck with part-time hours who need full-time work, this is the best news of this month's unemployment report.  With less people working part-time, eventually businesses should have to hire additional workers (unless of course they offshore outsource to China and India).

Below is a graph of forced into part-time  work because they got their hours cut, graphed  as a percentage of the total employed.  Part-time due to cut hours  is known as slack work conditions and consisted of 4,906,000 people for March.  This is a decline of -230,000 from last month.   Below is a graph of forced part-timers due to slack work conditions as a percentage of the civilian labor force.  We think this graph is a recession economic indicator, and notice the slope matches strongly the gray recession bars of the graph.  The percentage of people in working part-time due to slack economic conditions has stayed extremely high since the start of the Great Recession, even though it is overall clearly on a downward trend.

U-6 is a broader measure of unemployment and includes the official unemployed, people working part-time hours because that's all they can get and a subgroup not counted in the labor force but are available for work and looked in the last 12 months.  Believe this or not, the U-6 alternative unemployment rate still leaves out some people wanting a job who are not considered part of the labor force.  U-6 declined a whopping -0.5 percentage points to 13.8%.  The reason for the massive drop in U-6 are the declines in part-timers shown above.

The long term unemployed, or those unemployed for 27 weeks and over, stand at 4,611,000 people.  This is a decline of -186 thousand from last month.  The long term unemployed are the crisis of our time and this figure just isn't decreasing and they are getting hired.  The long term unemployed are now 39.6% of the total unemployed and this percentage decreased -0.6 percentage points from last month.    Because we see such an increase in those not in the labor force, odds are we just saw more long term unemployed drop off the unemployed statistics radar instead of actually getting a job.  Behind this figure is economic devastation for 4.6 million people.

The marginally attached are people not in the labor force because they have not looked for a job in the last month, but have looked for a job in the last year. This number has ballooned since 2007 and not returned to pre-recession levels. The graph below is the number of people considered marginally attached to the labor force, currently at 2.326 million.

Discouraged workers are people, not counted as part of the civilian labor force, who not only want a job, but also looked for one in the last year.  These people aren't job hunting now because they believe there are no jobs out there.  Below is the graph of discouraged workers, currently at 803 thousand people and are a subset of the marginally attached.  Discouraged workers is kind of a baramoter for how the job market is perceived.

One of our favorite statistics from the CPS survey is how many people who are considered not in the labor force, want a job now.  It is a direct survey question from the CPS.  The survey asks people who are not being counted in the unemployment statistics and official unemployment rate if they want a job.  The number who answer yes currently stands at 6,722,000.  This is a 101 thousand person decrease from last month.   That's an astounding number of people not counted who report they actually want a job and roughly 2 million higher than before the recession.   This figure includes the discouraged workers and marginally attached, but is seasonally adjusted, unlike the above.

The average length of unemployment is now 37.1 weeks, an increase of 0.2 weeks from last month.  This still is an absurdly long amount of time to be unemployed and has stayed highly elevated for years, an uptick is not what we want to see.

The average duration is also so high due to the long-term unemployed, who clearly are having a hell of a time getting a job, many facing age discrimination. 

The median time one is unemployed, which means 50% of people have gotten a job in this amount of time, and is 18.1 weeks, an increase of 0.3 weeks from last month.. 

Those unemployed less than five weeks dropped by -203 thousand, those unemployed between five weeks and 14 weeks increased by 56 thousand and people who had been unemployed for 14 weeks to 26 weeks also increased 42,000.  As previously noted, the long term unemployed dropped by -203 thousand.  Yet do not let the decline in short and long term unemployed fool you into thinking the job market is picking up from these duration figures.  A drop in the unemployed does not necessarily mean they found a job.

How Many Jobs Are Needed to Keep Up with Population Growth?

by Robert Oak | The Economic Populist


The press quotes all sorts of figures for the number of monthly job gains needed to keep up with population growth. We see numbers like 80,000, 100,000, 125,000 and 175,000 thrown around like statistical snow as the number of jobs needed each month just to keep up. What's the right one? How many jobs are needed each month just to keep up with population growth?

The actual monthly amount can be calculated and the Atlanta Fed even did us a huge favor by publishing an interactive monthly jobs calculator so you can go check for yourself. This month shows we need 104,116 payroll jobs to maintain the same unemployment rate of 8.1% with all of the other same terrible conditions the state of employment is in.

That's the key, the current terrible conditions the state of employment is in today. One of the reasons the number of jobs to keep up with population growth is so low is due to so many having dropped out of the labor force. If we had more people being counted as needing a job, the number of jobs to keep up with population growth would be much higher.

To explain this, we need to go to BLS school and learn some labor concepts. The employment universe comes from the civilian noninstitutional population. These are people in the United States, aged 16 and over, who aren't in the military, infirmed or locked up somewhere.

The above pie chart shows how the civilian nonstitutional population is divided up into two classifications, either you're in the civilian labor force, or you're not. The employment statistics come from the civilian labor force. Those who are classified as not in the labor force are not counted, and thus not considered as needing a job or mattering when their numbers swell.

The civilian labor force is then divided up into two categories, either you have a job or you don't. In the unemployed category, you have to be actively looking to be considered as part of the civilian labor force. The above pie chart shows the breakdown, using the August 2012 statistics.

The civilian noninstitutional population grows every month and for 2011, the average was 0.059% per month. For the last 12 months, the average was 0.128% per month, so the population growth varies, but there is a huge problem. The woe is the Census puts their annual benchmark adjustments in the month of January only. The benchmark adjustments are not annually smoothed or averaged in on a month to month basis. This makes the monthly population percentage growth more difficult to estimate, for we have a fudge factor plopped in between the December and January estimates. We can see the annual benchmarks, or fudge factor, in the below graph showing the monthly change in civilian noninstitutional population.

What we can do is ignore the months of January and take the average growth rate for the last year, bypassing the benchmark weirdness month. Doing this gives a monthly growth rate of 0.0762% for noninstitutional civilian population and thus we smooth away those benchmarks to get a much more realistic average population growth rate.

If the fact that the benchmark adjustments are not evenly distributed across the monthly change in noninstitutional civilian population isn't enough to throw a monkey wrench into figuring out how many jobs we need each month just to keep up, we have an additional problem. There are people who really are not in the labor force and these percentages change. The population is getting older, we have more retirees and unfortunately we put people in prison more than any other industrialized nation. Then, other people are not part of the labor force because they have been unemployed so long they are no longer counted. In other words, we cannot say that all of the growth of those not in the labor force is due to people dropping off of the unemployed statistical radar. That said, clearly many are. Where we can see this most is in the labor participation rate. The labor participation rate is the ratio of the civilian labor force to those not in the labor force. The below graph shows we are at record lows in the ratio of those as part of the labor force to those who are not.

If we take the labor participation rate at the start of the great recession, 66%, we get a whole other number of jobs needed each month to keep up with population growth. If we keep the same rate of unemployment, 8.1%, we would need 545,551 jobs per month and it would take an entire year to get to the same August rate of unemployment, 8.1%.

This is because by increasing the labor participation rate 2.5%, we took 6,089,150 people not counted and added them to the labor force statistics and of course, they would enter in as unemployed. The unemployment rate is the ratio of those in the civilian labor force who do not have a job against those who who do.

We can also estimate the number of jobs needed each month, just to maintain, by rough numbers. If we assume a smoothed noninstitutional civilian population growth rate of 0.076% per month, then next month's population growth would be 185,617 additional people ages 16 and over and not locked up somewhere. If we then assume the labor participation rate of this new growth would be 68.0% and not the actual, artificially low 63.5%, we would get an additional 126,920 jobs needed to keep up with this population growth.

This is much more realistic for new population growth is probably going to enter the labor force looking for a job. The BLS counts illegal immigrants, green card holders and foreign guest workers in their statistics and most of the population growth is due to immigration. These people either already have a job upon entering the country, or are going to want one fast. Bottom line, yes Virginia, increased immigration does affect labor markets, all else being static. I do believe to say our economic growth and thus labor demand is static at the moment is not an understatement.

Check out the Atlanta Federal Reserve jobs calculator. It's Economic Populist approved, we checked their arithmetic and assumptions.

If this is not enough to convince you, we suggest reading this article, this or this one for more background.

Finally our favorite and never reported BLS statistic amplifies the terrible situation for labor in this country. The BLS surveys people considered not part of the labor force and asks if they want a job right now. Below is a graph of the people who said yes and watch how this figure swells.

For August 2012, those not counted in the labor force but report they actually want and need a job increased by 403,000 in a month. That, folks, should have you horrified. Literally we have desperate and destitute people falling through the statistical crevasse, into the abyss where they can only shout out from the numerical darkness, yes I want a job!

The Excel Depression

By PAUL KRUGMAN - NY Times
Published: April 18, 2013


In this age of information, math errors can lead to disaster. NASA’s Mars Orbiter crashed because engineers forgot to convert to metric measurements; JPMorgan Chase’s “London Whale” venture went bad in part because modelers divided by a sum instead of an average. So, did an Excel coding error destroy the economies of the Western world?

The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, Growth in a Time of Debt, that purported to identify a critical “threshold,” a tipping point, for government indebtedness.

Once debt exceeds 90 percent of gross domestic product, they claimed, economic growth drops off sharply.

Ms. Reinhart and Mr. Rogoff had credibility thanks to a widely admired earlier book on the history of financial crises, and their timing was impeccable. The paper came out just after Greece went into crisis and played right into the desire of many officials to “pivot” from stimulus to austerity. As a result, the paper instantly became famous; it was, and is, surely the most influential economic analysis of recent years.

In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.

For the truth is that Reinhart-Rogoff faced substantial criticism from the start, and the controversy grew over time. As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around, with poor economic performance leading to high debt. Indeed, that’s obviously the case for Japan, which went deep into debt only after its growth collapsed in the early 1990s.

Over time, another problem emerged: Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results. They typically found some correlation between high debt and slow growth — but nothing that looked like a tipping point at 90 percent or, indeed, any particular level of debt.

Finally, Ms. Reinhart and Mr. Rogoff allowed researchers at the University of Massachusetts to look at their original spreadsheet — and the mystery of the irreproducible results was solved. First, they omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error. Correct these oddities and errors, and you get what other researchers have found: some correlation between high debt and slow growth, with no indication of which is causing which, but no sign at all of that 90 percent “threshold.”

In response, Ms. Reinhart and Mr. Rogoff have acknowledged the coding error, defended their other decisions and claimed that they never asserted that debt necessarily causes slow growth. That’s a bit disingenuous because they repeatedly insinuated that proposition even if they avoided saying it outright. But, in any case, what really matters isn’t what they meant to say, it’s how their work was read:  

Austerity enthusiasts trumpeted that supposed 90 percent tipping point as a proven fact and a reason to slash government spending even in the face of mass unemployment.

So the Reinhart-Rogoff fiasco needs to be seen in the broader context of austerity mania: the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.

What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed.  

Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.

So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on.

March Against Monsanto the Devil

Depression Chemical Imbalance Doesn’t Exist

Depression Chemical Imbalance Doesn’t Exist, Experts Say
by Elizabeth Renter
04/18/2013

What if you went to a crime ridden street corner, suffering from depression, and were told that a certain drug could change how you felt about things? What if you went to your doctor and were told the same thing? While the corner drug dealer and your physician might have different drugs in mind, they are essentially offering a similar solution—putting you in a “drug-induced” state to minimize your negative symptoms. Doctors, the media, and society say there is a chemical imbalance which causes depression, but a depression chemical imbalance doesn’t exist, experts say.

Dr. Joanna Moncrieff, a mental health expert from the department of mental health services at University College in London is taking a quite non-politically-correct approach in characterizing anti-depressants and other mental health drugs as just another dependency.

She says that although doctors, the media, and society in general has latched on to the idea that depression and anxiety, for example, are just evidence of a “chemical imbalance” in the brain, there is no hard evidence to support this.

“Scientific research has not detected any reliable abnormalities of the serotonin system in people who are depressed.”

While many people are convinced this is indeed their problem and therefore are okay with being offered a drug to solve the “problem”, she says the problem is that we are minimizing the seriousness of taking drugs to solve a “mental disorder.”

It is frequently overlooked that drugs used in psychiatry are psychoactive drugs, like alcohol and cannabis. Psychoactive drugs make people feel different; they put people into an altered mental and physical state. They affect everyone, regardless of whether they have a mental disorder or not. Therefore, an alternative way of understanding how psychiatric drugs affect people is to look at the psychoactive effects they produce

She says that these drugs, like anti-depressants, often produce symptoms of other, illegal drugs. The difference—these are prescribed by medical professionals and marketed to the masses in a more acceptable way.

In decades past, there was a stigma associated with mental health drugs. While it’s debatable whether this stigma was justified, there’s little doubt that it did make people think twice about taking medication for depression.

Now, however, we are convinced that these drugs are correcting a defect in the brain. The drugs are correcting an “imbalance.” But the problem is, that imbalance has never been proven.

Sure, you can argue that your medication makes you feel better, but wouldn’t other psychoactive drugs make you feel better too?

Dr. Moncrieff isn’t suggesting that people take cheaper illegal drugs, since they may have similar effects, but instead wants people to really get real about their anti-depression or anti-anxiety medications– what are they really doing to themselves when they rise each morning and pop the same pill, occasionally having to up their dosage because their body has developed a tolerance.

And with the number of Americans on antidepressant medication estimated to be 1 in 10, perhaps a critical look at this drug trade is warranted.

Obama’s drug czar attacks state marijuana laws

RT | April 18, 2013

US President Barack Obama’s drug czar has spoken out against recently-passed state laws in Colorado and Washington, condemning legislation that legalizes the possession of marijuana in small amounts.

Gil Kerlikowske, director of the White House Office of National Drug Control Policy, told an audience in Washington, DC on Wednesday that the Obama administration does not plan on honoring new state laws that let the millions of adults in Colorado and Washington legally smoke up.

Late last year voters in both states passed separate but similar laws allowing residents and visitors over the age of 21 to legally possess up to an ounce of marijuana, in doing so becoming two of the first venues in the nation to relax stringent state legislation.

But despite those laws reflecting the overwhelming voice of voters, Kerlikowske says the White House will rely on a longstanding federal statute that puts pot in the same category as heroin, cocaine and other Schedule I narcotics.

“No state, no executive can nullify a statute that has been passed by Congress,” Kerlikowske said at a National Press Club luncheon on Wednesday, reports Agence France-Presse.

“Let’s be clear: law enforcement officers take an oath of office to uphold federal law and they are going to continue to pursue drug traffickers and drug dealers,” he said.

Under current federal legislation, a first-time offender caught with marijuana can be forced to pay a $1,000 fine and spend a year in prison. Repeat offenders face penalties that include three-year prison stints and fines reaching $5,000.

According to the Huffington Post, Kerlikowske continued:

"Neither a state nor the executive branch can nullify a statute passed by Congress . . . Nor should we lose sight of the fundamental fact that using marijuana has public health consequences, and the most responsible public policy is one that restricts its availability and discourages its use."

"Neither a state nor the executive branch can nullify a statute passed by Congress," Kerlikowske affirmed.

Colorado Gov. John Hickenlooper has yet to formally respond to the administration’s comment, but he said he supported his constituents’ concerns when they voted to legalize weed last year.

“The voters have spoken and we have to respect their will,” Hickenlooper said after the November election. “This will be a complicated process, but we intend to follow through.”

But just weeks after voters in Washington passed a marijuana reform bill in November, state attorney Jenny A. Durkan said it wouldn’t deter federal prosecutors.

“Regardless of any changes in state law, including the change that will go into effect on December 6 in Washington State, growing, selling or possessing any amount of marijuana remains illegal under federal law,” she said.

CISPA Vote: House Passes Cybersecurity Bill To Let Companies Break Privacy Contracts

Guilty until proven guilty...

Zach Carter
Sabrina Siddiqui
Huffington Post
04/18/2013

WASHINGTON -- The House of Representatives passed a broad cybersecurity bill Thursday that allows corporations to share customers' personal data with other firms and the U.S. government, even in cases in which a company has a signed contract explicitly vowing not to do so.

The Cyber Intelligence Sharing and Protection Act, known as CISPA, passed by a margin of 288 to 127, despite receiving a late veto threat from the Obama administration, which warned that the bill does not sufficiently protect civil liberties. The veto threat was particularly noteworthy, given President Barack Obama's Department of Justice has been urging Congress to expand its data-gathering and cybercrime powers for years. Congress shelved a similar bill last year after the White House expressed its formal opposition.

Supporters of the bill argue that it's needed to help the government protect key infrastructure and institutions from online attacks. They also have said the bill doesn't require companies or the government to monitor customer content, although it does authorize them to share personal account data, including emails and other information. Firms that voluntarily turn over such data would be immune from civil lawsuits.

The broad language of the bill, which imposes its standards above "any other provision of law," would effectively void privacy contracts between companies and their customers. Specifically it states that "Notwithstanding any other provision of law, a self-protected entity may, for cybersecurity purposes ... share such cyber threat information with any other entity, including the Federal Government." Companies could not be held accountable for violating terms of service agreements or other arrangements in which they promise not to share customer information with other parties.

Privacy and civil liberties advocates, including the American Civil Liberties Union, have blasted CISPA for overriding private contracts and authorizing both corporate and government access to personal information. Several Internet freedom groups also objected to the bill, warning that people will be less willing to use online services for fear that their privacy will be compromised.

Privacy proponents like the Electronic Frontier Foundation had urged the House to adopt an amendment that would have allowed companies to make legally enforceable privacy contracts with their customers. The amendment was never brought up for a vote.

The bill's opponents shared their concerns with the White House in the form a petition, which received the 100,000 signatures necessary to elicit a formal response last month. They also submitted more than 300,000 online signatures to the House Intelligence Committee.

But the corporate coalition that teamed up with web activists to take down the Stop Online Piracy Act in January 2012 was notably fractured during the congressional debate over CISPA. Many telecom companies, including AT&T and Comcast, support the legislation, which exempts them from legal liabilities. Chip manufacturer Intel and security software firm McAfee are also in favor. Others, such as Google, took no public position, while Microsoft and Facebook rescinded their support for the legislation, the latter after facing pressure from Demand Progress, the Internet freedom advocacy group founded by Aaron Swartz.

The intensity of the opposition, however, has been far more muted than that against SOPA, which pitted the bill's Silicon Valley opponents against support from corporate interests in Hollywood.

The weak corporate opposition to CISPA underscores the uphill battle that many nonprofit advocacy groups face in Washington when they lack such support: With corporate backing for the opposition, SOPA was abandoned without a vote, while CISPA, which is opposed largely by nonprofits, sailed through the House.

The CISPA vote also tested the Internet freedom credentials of SOPA opponents Reps. Darrell Issa (R-Calif.) and Jason Chaffetz (R-Utah), who have made significant inroads among web activists and tech firms on behalf of the Republican Party. Nevertheless, both voted in favor of CISPA.

Issa and Chaffetz defended their votes and argued that resurrecting their opposition to SOPA in the debate over CISPA was comparing apples to oranges.

"[SOPA] was a totally different thing ... just completely about something else," Chaffetz told The Huffington Post. "This is a question of cyber threats and our national security, and I believe we have to do everything we can to protect our national security."

Issa, who serves as the House Oversight Committee Chairman, said he was aware of the backlash the bill will provoke from the privacy and civil liberties communities but that he was comfortable with the final product.

"We've done our best to address their concerns in this bill," he told HuffPost, adding that measures would be taken to ensure oversight of what information was being shared, should the bill become law. "I'm confident we have all of the appropriate privacy protections in place."

The bill's chief backers stepped up pressure on members to garner their support ahead of the vote. CISPA sponsor Rep. Mike Rogers (R-Mich.) implied opponents were basically teenagers in their basements, while Rep. Michael McCaul (R-Texas) on the House floor invoked this week's Boston Marathon bombing to underscore the need to enhance national security.

Free Comic Book Day, Saturday, May 4th, 2013

May the 4th Be With You on FREE COMIC BOOK DAY, 2013!!!

STAR TREK: Into Darkness

Wealthiest Americans have established a propaganda tool to subvert democracy

The Propaganda System That Has Helped Create a Permanent Overclass Is Over a Century in the Making

Where there is the possibility of democracy, there is the inevitability of elite insecurity. All through its history, democracy has been under a sustained attack by elite interests, political, economic, and cultural. There is a simple reason for this: democracy – as in true democracy – places power with people. In such circumstances, the few who hold power become threatened. With technological changes in modern history, with literacy and education, mass communication, organization and activism, elites have had to react to the changing nature of society – locally and globally.

From the late 19th century on, the “threats” to elite interests from the possibility of true democracy mobilized institutions, ideologies, and individuals in support of power. What began was a massive social engineering project with one objective: control. Through educational institutions, the social sciences, philanthropic foundations, public relations and advertising agencies, corporations, banks, and states, powerful interests sought to reform and protect their power from the potential of popular democracy.

Yet for all the efforts, organization, indoctrination and reformation of power interests, the threat of democracy has remained a constant, seemingly embedded in the human consciousness, persistent and pervasive.

In his highly influential work, The Crowd: A Study of the Popular Mind, French social psychologist Gustav Le Bon suggested that middle class politics were transforming into popular democracy, where “the opinion of the masses” was the most important opinion in society. He wrote: “The destinies of nations are elaborated at present in the heart of the masses, and no longer in the councils of princes.” This was, of course, a deplorable change for elites, suggesting that, “[t]he divine right of the masses is about to replace the divine right of kings.” Le Bon suggested, however, that the “crowd” was not rational, but rather was driven by emotion and passion.

An associate and friend of Le Bon’s, Gabriel Tarde, expanded upon this concept, and articulated the idea that “the crowd” was a social group of the past, and that “the public” was “the social group of the future.” The public, argued Tarde, was a “spiritual collectivity, a dispersion of individuals who are physically separated and whose cohesion is entirely mental.” Thus, Tarde identified in the growth of the printing press and mass communications a powerful medium through which “the public” was shaped, and that, if managed appropriately, could bring a sense of order to a situation increasingly chaotic. The newspaper, Tarde explained, facilitated “the fusion of personal opinions into local opinions, and this into national and world opinion, the grandiose unification of the public mind.”

The development of psychology, psychoanalysis, and other disciplines increasingly portrayed the “public” and the population as irrational beings incapable of making their own decisions. The premise was simple: if the population was driven by dangerous, irrational emotions, they needed to be kept out of power and ruled over by those who were driven by reason and rationality, naturally, those who were already in power.

The Princeton Radio Project, which began in the 1930s with Rockefeller Foundation funding, brought together many psychologists, social scientists, and “experts” armed with an interest in social control, mass communication, and propaganda. The Princeton Radio Project had a profound influence upon the development of a modern "democratic propaganda" in the United States and elsewhere in the industrialized world. It helped in establishing and nurturing the ideas, institutions, and individuals who would come to shape America’s “democratic propaganda” throughout the Cold War, a program fostered between the private corporations which own the media, advertising, marketing, and public relations industries, and the state itself.

'A Genuinely Democratic Propaganda'

World War I popularized the term “propaganda” and gave it negative connotations, as all major nations involved in the war effort employed new techniques of modern propaganda to mobilize their populations for war. In the United States, the effort was led by President Woodrow Wilson in the establishment of the Committee on Public Information (CPI) as a “vast propaganda ministry.” The central theme of the CPI was to promote U.S. entry into the war on the basis of seeking “to make a world that is safe for democracy.” This point was specifically developed by the leading intellectual of the era, Walter Lippmann, who by the age of 25 was referred to by President Theodore Roosevelt as “the most brilliant man of his age.” Lippmann was concerned primarily with the maintenance of the state-capitalist system in the face of increased unrest, resistance, and ideological opposition, feeling that the “discipline of science” would need to be applied to democracy, where social engineers and social scientists “would provide the modern state with a foundation upon which a new stability might be realized.” For this, Lippmann suggested the necessity of “intelligence and information control” in what he termed the “manufacture of consent.”

Important intellectuals of the era then became principally concerned with the issue of propaganda during peacetime, having witnessed its success in times of war. Propaganda, wrote Lippmann, “has a legitimate and desirable part to play in our democratic system.” A leading political scientist of the era, Harold Lasswell, noted: “Propaganda is surely here to stay.” In his 1925 book, The Phantom Public, Lippmann wrote that the public was a “bewildered herd” of “ignorant and meddlesome outsiders” who should be maintained as “interested spectators of action,” and distinct from the actors themselves, the powerful. Edward Bernays, the ‘father of public relations’ and nephew of Sigmund Freud got his start with Wilson’s CPI during World War I, and had since become a leading voice in the fields of propaganda and public relations. In his 1928 book, Propaganda, Bernays wrote: “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.” Modern society was dominated by a “relatively small number of persons... who understand the mental processes and social patterns of the masses,” and this was, in Bernays’ thinking, “a logical result of the way in which our democratic society is organized.” Bernays referred to this – “borrowing” from Walter Lippmann – as the “engineering of consent.”

For the leading intellectuals and social engineers of the era, “propaganda” was presented as distinctly “democratic” and as a necessity to the proper functioning of society. John Marshall of the Rockefeller Foundation focused on what he called the “problem of propaganda” and sought to create, as he wrote in 1938, a “genuinely democratic propaganda.” Marshall pursued this objective through the Rockefeller Foundation, and specifically with the Princeton Radio Project in the late 1930s under the direction of Hadley Cantril and Frank Stanton, though including other intellectuals such as Paul Lazarsfeld and Harold Lasswell.

In 1936, Marshall wrote that the best way to expand the use of radio and film was for the Rockefeller Foundation to give “a few younger men with talent for these mediums an opportunity for relatively free experimentation... men interested primarily in education, literature, criticism, or in disseminating the findings of the social or natural sciences.”

In 1939, with the war in Europe under way, the Rockefeller Foundation had organized several conferences and published several papers on the issue of mass communication, directed by what was called the Communications Group, headed by Marshall and other Foundation officials, and with the participation of Lasswell, Lazarzfeld, Cantril, and several others. Early on, the Communications Group noted that with “an increasing degree of [government] control... in regard to all phases of communication, such as in the schools, the radio, the films, the press, and even eventually in all public discussion,” it was necessary to arrive at a consensus – among the “experts” – as to what role they should play as the state expands its authority over communication. Sociologist Robert Lynd took a page from Lippmann and wrote that a “goal” of experts in communication should “be that of persuading the people that there are many issues too complicated for them to decide, which should be left to experts.” One other participant commented on Lynd’s suggestion: “Mr. Lynd feels we need a restructuring of democratic action in terms of the capacity of different groups of the population and an abandonment of the American idea of the responsibility and capacity of the man on the street.” In 1940, John Marshall wrote:

In a period of emergency such as I believe we now face, the manipulation of public opinion to meet emergency needs has to be taken for granted. In such a period, those in control must shape public opinion to support courses of action which the emergency necessitates... No one, I think, can blame them for that impulse.

In a 1940 memo for the Communications Group, Marshall wrote that, “We believe... that for leadership to secure that consent will require unprecedented knowledge of the public mind and of the means by which leadership can secure consent... We believe... that we gave available today methods of research which can reliably inform us about the public mind and how it is being, or can be, influenced in relation to public affairs.” The memo concerned some officials at the Rockefeller Foundation, noting that it could be misinterpreted and that such research should be careful about becoming a mere tool of the state, with one official noting: “Public opinion and vested interests are... violently opposed to such a development which would be labeled as fascist or authoritarian.” Another official suggested that the memo “looks to me like something that [Nazi propaganda chief] Herr Goebbels could put out with complete sincerity.” While one Foundation official referred to the memo as resembling “the methods by which democracy has been destroyed,” he added that, “finding out regularly and completely what the mass of the people feel and believe and think about things and policies is a necessary part of the modern democratic process.” Marshall and the Communications Group refined their approach from a more overt authoritarianism of “one-way” communication between the state and the population, to a more Lippmann-centered concept of “manufacturing consent” and what has been referred to as “democratic elitism.” In the final report of the Communications Group in 1940, it was noted that two-way communication between the government and population was essential, as without it, “democracy is endangered,” and that it was required for the population to give “consent.”

Frank Stanton, along with Hadley Cantril, was one of the co-directors of the Princeton Project since its inception. As Michael J. Socolow wrote in the Journal of Broadcasting & Electronic Media, Frank Stanton had “devoted much of his life to understanding the cultural, social, and psychological effects of the mass media.” Stanton was the president of CBS from 1946 until 1973, during which he “proved to be an effective corporate strategist” and “a skillful political operator,” not least of all because he “collaborated closely with the U.S. government, performing propaganda tasks during the Second World War and the ensuing Cold War.”

Stanton’s first job was in the advertising industry, beginning in 1929 and cut short by the market crash, though Stanton maintained that advertising “was the greatest thing since sliced bread.” In school, Stanton studied business administration and psychology, being particularly influenced by John B. Watson, the developer of behaviorism, who himself went to go work for an advertising agency. Throughout his own life and career, Stanton viewed himself as “a behaviorist, a social scientist valuing the application of psychological technique across a variety of human endeavors.”

Behaviorism was a brand of psychology which emerged in response to the development of the field by social scientists seeking to make "scientific" what was previously the realm of philosophy and spirituality, drawing in political scientists, economists, sociologists, and others. The field of psychology had become more prominent following World War I, after having proved its worth to power interests in mobilizing, manipulating, and studying populations and their perceptions. In 1929, the president of Yale, James Agnell, announced the creation of the Yale Institute of Human Relations (IHR), with a generous grant from the Rockefeller Foundation. Agnell explained that the IHR was “directly concerned with the problems of man’s individual and group conduct,” out of which the purpose was “to correlate knowledge and coordinate technique in related fields that greater progress may be made in the understanding of human life.”

The IHR helped facilitate the rise of behaviorism in psychology, as in the 1920s and 30s, social unrest was a growing problem, and so psychologists attempted to promote themselves and their field as a possible solution to these problems, as a “scientific psychology” – or “social psychology” – could “be instrumental for attaining democratic social order and control.” Such a theory was based upon the view that the individual was not well “adjusted” to a rapidly changing environment, and therefore, with the help of psychology, the individual could be “adjusted” successfully. Of course, the notion that there is something inherently problematic with society and the social order (and the hierarchy upon which it was built) went unquestioned. In other words, it was not society which needed to "adjust" to individuals and the population, but rather the opposite. Psychologists and Yale’s Institute of Human Relations would promote themselves as the solution to this complex problem. Behaviorism was thus concerned with environmental and behavior control in human relations. This influenced not only Frank Stanton, but other key officials who were involved in the Princeton Radio Project, including Paul Lazarsfeld.

Frank Stanton eventually got a job at CBS following some research he had done on radio audiences and had sent to CBS headquarters. In 1935, Stanton was the third employee hired by CBS for the research division, concerned largely with the ability of advertisers to sell to radio listeners. As Stanton explained in 1936, the contribution of psychology to radio research “should be largely one of technique,” adding: “It isn’t enough to know what programs are heard and preferred. We want to know why they are listened to and liked, and furthermore, we want to quantify influence.” Weeks later, Stanton – with the suggestion of Hadley Cantril – wrote a draft memo of a research proposal for the Rockefeller Foundation, out of which would come to Office of Radio Research at Princeton.

The Princeton Radio Project, established with Rockefeller funding and directed by Paul Lazarsfeld, Cantril, and Stanton, focused on studying the uses and effects of radio communications upon the population, and almost exclusively led to the field of mass communications research. Theodor Adorno, a critical theorist whom Lazarsfeld invited to join the Princeton Radio Project ran into several problems during his research with his associates. Lazarsfeld brought Adorno into the project hoping that he could bridge the gap between American and European approaches to research. Adorno, however, sought to understand not simply the effects of radio in mass communications, but the role played by the "researcher" – or “expert” – in the social order itself. This put him in direct conflict with the project and its philosophy. For Adorno, wrote Slack and Allor, “not only the processes of communication but the practice of communication research itself had to be viewed critically.” Reflecting upon his experience some decades later, Adorno wrote that, “there appeared to be little room for such social research in the framework of the Princeton Project.” He noted: “Its charter, which came from the Rockefeller Foundation, expressly stipulated that the investigations must be performed within the limits of the commercial radio system prevailing in the United States.” Thus, “the system itself, its cultural and sociological consequences and its social and economic presuppositions were not to be analyzed... I was disturbed.”

Shortly after World War II and into the 1950s, the U.S. State Department became increasingly interested in the subject of propaganda, or what was termed “information management” and “public diplomacy.” Television was of particular interest in promoting American state interests, specifically those defined by the Cold War. Francis Russell, the director of the State Department’s Public Affairs (PA) division from 1945 to 1953, noted that “propaganda abroad is indispensable” in the Cold War, but that the State Department had “diligently cultivated the concept of PA as a service to the American people, a place where the public can come to obtain information.” He explained his worry that, “if the American people ever get the idea that the same high-powered propaganda machine” used abroad was “also at work on them, the result will be disaster fir both the domestic and overseas programs.” The role of the PA was not in a censorship bureau, but as a dispenser of "information," to which the media – largely privately owned – would use as a consistent source for reporting, re-printing press releases, and seeking official sources for comment. Edward Barrett, another top official in the PA division, later noted: “We really tried to stick to the truth and tell nothing but the truth, but we didn’t always tell the whole truth.”

Nancy Bernhard, writing in the journal Diplomatic History, explained this contradiction aptly: “While Americans defended commercial broadcasting because it was free from Communistic government control, commercial broadcasters voluntarily collaborated with the government information services in the name of anticommunism. "Free" broadcasters volunteered as a virtually official information agency.” It was no surprise, then, that government “information programs” used the specific talents of corporate tycoons in the media world, bringing in talent from networks, advertising agencies, public relations agencies, and marketing bureaus. The State Department established a number of “advisory boards” to monitor its “public affairs” operations, largely made up of industry and corporate officials. Among the influential board members was Frank Stanton.

When Eisenhower came to power, a new agency was created to handle information and cultural programs previously undertaken by the State Department, the US Information Agency (USIA), established in 1953. In attempting to create a terminology to describe the activities of the USIA and its relationship to foreign policy goals – without using the obvious term “propaganda” – the term “public diplomacy” was commonly used. Frank Stanton, who left CBS in 1973, subsequently chaired a research report by the prominent American think tank, the Center for Strategic and International Studies (CSIS) in 1975, entitled, International Information Education and Cultural Relations – Recommendations for the Future. The report recommended “that the international information and cultural programs [of the U.S. government] deserve all possible support in the years ahead, that they have demonstrated their success and are therefore an exceptional investment of government energy and the taxpayer’s dollar.”

While head of CBS, Stanton developed relationships with American presidents, whose Cold War strategies he would help promote through his network. When Kennedy became president, he offered Frank Stanton the job as head of the United States Information Agency (USIA), which Stanton declined (though recommended the appointment of Edward R. Murrow, a prominent journalist with CBS, whom Stanton had no lack of problems with). In fact, in 1958, Edward R. Murrow delivered a speech before the Radio-Television News Directors Association in which he “implicitly indicted Stanton” for the way in which he managed CBS, stating: “The top management of the networks... has been trained in advertising, research, or show business... by the nature of the corporate structure, [these managers] also make the final and crucial decisions having to do with news and public affairs. Frequently they have neither the time nor the competence to do this.”

Stanton developed a reputation as a trustworthy propagandist for the Cold War, but was not unwilling to flex his own power when confronted with state power, such as when President Lyndon Johnson, angry at specific coverage of Vietnam on CBS, called up Stanton and stated, “Frank, are you trying to fuck your country?” Stanton refused to budge on his coverage under pressure from the president. Yet still, he remained a propagandist, and even participated in the CIA’s program to infiltrate the domestic media, with general knowledge of the Agency’s program with CBS, though according to one CIA agent involved in the matter, he didn’t “want to know the fine points.”

Stanton, however, was ultimately a corporation man. Not only did he help in the development of the government’s official propaganda systems, but he was a key figure in the promotion of the "corporatization" of news and information. Thus, for Stanton, “information management” was not simply to be done in the interests of the state, but also – and arguably primarily – in the interests of corporations. In Stanton’s own words, “since we are advertiser supported we must take into account the general objectives and desires of advertisers as a whole.” Stanton was not the only executive to voice such views, as one executive at NBC as early as 1940, declared, “we should make money on our news.”

The ‘Social Control’ Society: A Background to ‘Democratic Propaganda’

One of the primary institutions of social control is the educational system. For primary and secondary educational institutions, the original objective was to foster a strong sense of national identity, bringing a cohesive world view to the development of a national citizenry, and thus, to establish a system of social control. For university education, the original and evolving intend had been to develop an elite capable of managing society, and thus, to produce the controllers and technicians of society, itself. As the modern university underwent a major transformation in late 19th century America, it sought to apply the potential of the "sciences" to the social world, and thus, in a society undergoing rapid industrialization, urbanization, poverty, immigration, labour unrest, and new forms of communication, the "social sciences" were developed with an objective of producing social engineers and technicians for a new society of "social control."

The major industrial and financial elites had a direct role to play in the transformation of this educational system, and a substantial interest in the ideologies which would emerge from them. As Andrew Carnegie wrote in 1889, at the top of the list of “charitable deeds” to undertake was “the founding of a university by men enormously rich, such men as must necessarily be few in any country.” It was in this context, of robber barons seeking to remake education, that we see the founding of several of America’s top universities, many of which were named after their robber baron founders, such as Stanford (after Leland Stanford), Cornell (after Ezra Cornell), and Johns Hopkins, who owned the Baltimore & Ohio Railroad.

This new class of industrialists, who emerged out of the Civil War in America, “challenged the position of the old propertied, pre-industrial elite. This struggle crystallized in particular around the reform of the educational system that had legitimated the old elite’s domination.” The modern university was born out of this struggle between elites, with the old educational system based upon religious and moral values, “and the making of gentlemen,” while the “new education” focused on “the importance of management or administration” as well as “public service, [and] the advancement of knowledge through original investigation.”

John D. Rockefeller founded the University of Chicago in 1891, and the President of the University, “initiated a new disciplinary system, which was enormously influential.” Ultimately, it “led to the formation of the department structure of the American university, which was internationally unique,” and was later exported around the world “with the help of American foundations.” This disciplinary system consisted of separating politics from economics (rejecting the notion of "political economy" and its "ideologies"), as ideology was “deemed unscientific and inappropriate in social sciences and political scientists have increasingly seen their function as service to the powerful, rather than providing leadership to populist or socialist movements.”

Nicolas Guilhot wrote in the journal Critical Sociology that since “social reform was inevitable,” these industrialists “chose to invest in the definition and scientific treatment of the 'social questions' of their time,” and subsequently, they “promoted reformist solutions that did not threaten the capitalistic nature of the social order,” and instead constructed a “private alternative to socialism.” Social control was not simply seen as the means through which a society – as it exists – could be maintained, but more often sought to preserve elements of that society (such as its hierarchical structure, the position of the elites) through periods of profound social change. In this sense, the question was “whether the processes of social control are able to maintain the social order [hierarchy] while transformation and social change take place.”

The United States was viewed “as the laboratory for the study of transitional society in the framework of a rapidly changing social structure,” and therefore, at a time when sociology was being established as an intellectual and academic discipline, “the United States could be viewed as a microcosm of social change and disorder.” The sociologist Edward A. Ross was the first to popularize the concept of social control in the American Journal of Sociology in 1896 and 1898, and later in his 1901 book, Social Control. Ross “viewed individuals as objects of society’s domination,” and suggested that society had to establish order “by channeling the behavior of its members into orderly relations.” Ross, largely influenced by Gabriel Tarde, did not believe that individuals were rational, but rather, that they would need to be "controlled" in one fashion or another. As some sociologists lamented in the 1920s, “all social problems turn out finally to be problems of social control,” and “the study of society was the study of social control.”

Sociology largely emerged from the University of Chicago (founded by John D. Rockefeller), with the world’s first department of sociology founded in 1892. The sociologists who rose within and out of the University of Chicago made up what was known as the "Chicago School of Sociology." The school developed the most influential sociologists in the nation, including George Herbert Mead and W.I. Thomas, two scholars who had profound influence on the development of the concept of "social control," and sociologists became “reform-oriented liberals, not radical revolutionaries or conservative cynics.”

The American Journal of Sociology was founded out of the University of Chicago by Albion Small, who was the head professor of the department of sociology, and became the editor of the journal for thirty years from 1895-1925. Between 1915 and 1940, the University of Chicago was the dominant force in sociology in the United States, and “the dominance of the Sociology Department was representative of the social sciences at Chicago during that period.” The school was largely made the center of not only sociology, but many areas of the social sciences, due to funding from outside sources, namely the major philanthropic foundations created by the Robber Baron industrialists in the early 20th century. The foundations became, in effect, engines of social engineering and perhaps the most effective institutions in the application of social control in modern society.

The Foundations of Social Control

The new industrial elite accumulated millions and even hundreds of millions by the end of the 19th century: Andrew Carnegie was worth roughly $300 million after he sold Carnegie Steel to J.P. Morgan in 1901, and by 1913, John D. Rockefeller was estimated to have a personal worth of $900 million. In the late 1880s, Rockefeller met Frederick T. Gates, a minister, educator, and administrator in the Baptist Church when they were negotiating the founding of a new university, which resulted with a pledge of $600,000 from Rockefeller to found the University of Chicago in 1889. At this time, Rockefeller hired Gates as his associate in charge of Rockefeller’s philanthropic ventures. Gates became central in inculcating the notion of “scientific benevolence” within Rockefeller’s philanthropies. As Gates wrote in his autobiography, “I gradually developed and introduced in all his charities the principle of scientific giving.” Gates advised Rockefeller to form a series of “self-perpetuating” philanthropies.

The circumstances in which the Rockefeller Foundation emerged are notable. In 1913, a coal strike began at a Colorado mine owned by the Rockefellers in the small mining town of Ludlow, where roughly 11,000 workers (mostly Greek, Italian, and Serbian immigrants) went on strike against the “feudal domination of their lives in towns completely controlled by the mining companies.” Repression quickly followed, culminating in what became known as the Ludlow Massacre in 1914, with the Rockefellers hiring the National Guard to attack the strikers and destroy their tent city, machine gunning the crowd and setting fire to tents, one of which was discovered to have housed eleven children and two women, all of whom were killed by the fire.

The Congressional Walsh Commission was founded to investigate the activities which led to violent labour repression at the Colorado Fuel & Iron Company in Ludlow, though the scope of the Commission was expanded to study philanthropic foundations themselves. The Commission’s founder, Frank P. Walsh, explained:

...the creation of the Rockefeller and other foundations was the beginning of an effort to perpetuate the present position of predatory wealth through the corruption of sources of public information... [and] that if not checked by legislation, these foundations will be used as instruments to change to form of government of the U.S. at a future date, and there is even a hint that there is a fear of a monarchy.

In 1916, the Walsh Commission produced its final report, the Manly Report (after the research director, Basil M. Manly), which concluded that the foundations were so “grave a menace” to society, that “it would be desirable to recommend their abolition.” Frank Walsh referred to foundations as “a menace to the welfare of society.”

As the Walsh Commission began their work, the Rockefeller Foundation sought to join forces with other major corporate leaders to advance their formation of ideology, and attended a conference “held between representatives of some of the largest financial interests” in the United States. This conference resulted in two approaches being pushed forward in terms of seeking to “educate the citizenry in procapitalistic ideology and thus relieve unrest.” One view was the interpretation that the public was provided with “poor quality of facts and interpretation available on social and economic issues.” Thus, they felt there was a need for a “publicity bureau” to provide a “constant stream of correct information” targeted at the lower and middle classes. The Rockefeller Foundation agreed that a publicity bureau was a good strategy, but added that what was also needed was “a permanent research organization to manufacture knowledge on these subjects.” A publicity bureau would “correct popular misinformation,” while a research organization would study the “causes of social and economic evils,” though of course avoiding problematic considerations of institutional analysis or radical critiques. They were instead to focus on “disinterested” and “detached” studies of social problems, portraying themselves as scientists and technicians for society, focused on reform and social control.

Rockefeller interests quickly undertook both strategies. While the Foundation was engaged in the manufacture of ideology (which specifically states that it is “non-ideological,” meaning that it supports power), the corporate arm of the Rockefeller empire hired the first public relations man, Ivy Lee, a Progressive era journalist. The Foundation hired the Canadian labour expert, William Lyon Mackenzie King (who would later become Canada’s longest-serving Prime Minister) to manage “labour relations,” promoting “company unions” over “autonomous unions,” thus undermining the freedom of labour to organize and oppose the social order as a whole, bringing them firmly within the corporate-state ideology and institutions.

Ivy Lee, for his part, attempted to undertake “damage control” for the Rockefellers, who were widely despised at the time, acting as a PR man, disseminating communiqués to media and educators attempting “to cultivate middle-class allies.” His efforts at stemming animosity toward the Rockefellers following Ludlow failed, but for years he continued to present “the human side of the Rockefellers,” earning him the rather unfavourable nickname “Poison Ivy.”

While Lee’s specific efforts were unsuccessful, the ideas behind them continued to grow and evolve. Two major social engineering projects were underway: one, the manufacture of ideology, largely the initiative of philanthropic foundations (and the social sciences), and the other, public relations as a modern form of propaganda. Both of these social engineering projects were designed to ensure social control through social engineering, and both were to have a profound impact upon both the definition and function of modern “democracies.”

Through the educational system, the social sciences, philanthropic foundations, public relations, advertising, marketing, and the media, America and the industrialized states of the world developed a unique and complex system of social control and propaganda for the 20th century and into the 21st. It is imperative to recognize and understand this complex system if we are to challenge and change it.

How Much Unemployment Was Caused by Reinhart and Rogoff's Arithmetic Mistake?

Tuesday, 16 April 2013 | Beat the Press

That's the question millions will be asking when they see the new paper by the University of Massachusetts, Thomas Herndon, Michael Ash, and Robert Pollin. Herndon, Ash, and Pollin (HAP) corrected the spreadsheets of Carmen Reinhart and Ken Rogoff. They show the correct numbers tell a very different story about the relationship between debt and GDP growth than the one that Reinhart and Rogoff have been hawking.

Just to remind folks, Reinhart and Rogoff (R&R) are the authors of the widely acclaimed book on the history of financial crises, This Time is Different. They have also done several papers derived from this research, the main conclusion of which is that high ratios of debt to GDP lead to a long periods of slow growth. Their story line is that 90 percent is a cutoff line, with countries with debt-to-GDP ratios above this level seeing markedly slower growth than countries that have debt-to-GDP ratios below this level. The moral is to make sure the debt-to-GDP ratio does not get above 90 percent.

There are all sorts of good reasons for questioning this logic. First, there is good reason for believing causation goes the other way. Countries are likely to have high debt-to-GDP ratios because they are having serious economic problems.

Second, as Josh Bivens and John Irons have pointed out, the story of the bad growth in high debt years in the United States is driven by the demobilization after World War II. In other words, these were not bad economic times, the years of high debt in the United States had slow growth because millions of women opted to leave the paid labor force.

Third, the whole notion of public debt turns out to be ill-defined. Countries can sell off assets to pay down debts, would this avoid the R&R high debt twilight zone of slow growth? In fact, even the value of debt itself is not constant.Long-term debt issued in times of low interest rates will fall in value when interest rates rise. If there is a high debt twilight zone effect as R&R claim, then we can just buy back bonds at steep discounts and send our debt-to-GDP ratio plummeting.

But HAP tells us that we need not concern ourselves with any arguments this complicated. The basic R&R story was simply the result of them getting their own numbers wrong.

After being unable to reproduce R&R's results with publicly available data, HAP were able to get the spreadsheets that R&R had used for their calculations. It turns out that the initial results were driven by simple computational and transcription errors. The most important of these errors was excluding four years of growth data from New Zealand in which it was above the 90 percent debt-to-GDP threshold. When these four years are added in, the average growth rate in New Zealand for its high debt years was 2.6 percent, compared to the -7.6 percent that R&R had entered in their calculation.

Since R&R country weight their data (each country's growth rate has the same weight), and there are only seven countries that cross into the high debt region, correcting this one mistake alone adds 1.5 percentage points to the average growth rate for the high debt countries. This eliminates most of the falloff in growth that R&R find from high debt levels. (HAP find several other important errors in the R&R paper, however the missing New Zealand years are the biggest part of the story.)

This is a big deal because politicians around the world have used this finding from R&R to justify austerity measures that have slowed growth and raised unemployment. In the United States many politicians have pointed to R&R's work as justification for deficit reduction even though the economy is far below full employment by any reasonable measure. In Europe, R&R's work and its derivatives have been used to justify austerity policies that have pushed the unemployment rate over 10 percent for the euro zone as a whole and above 20 percent in Greece and Spain. In other words, this is a mistake that has had enormous consequences.

In fairness, there has been other research that makes similar claims, including more recent work by Reinhardt and Rogoff. But it was the initial R&R papers that created the framework for most of the subsequent policy debate. And HAP has shown that the key finding that debt slows growth was driven overwhelmingly by the exclusion of 4 years of data from New Zealand.

If facts mattered in economic policy debates, this should be the cause for a major reassessment of the deficit reduction policies being pursued in the United States and elsewhere. It should also cause reporters to be a bit slower to accept such sweeping claims at face value.

(Those interested in playing with the data itself can find it at the website for the Political Economic Research Institute.)

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