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Redistribution of wealth up as the essence of neoliberalism

Decline of middle class in the USA under neoliberal regime and rise of Economic Royalists ("Let them eat cake ")

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"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

-- Abraham Lincoln

Isn’t inequality merely the price of America being No. 1? ... That’s almost certainly false... Prior to about 20 years ago, most economists thought that inequality greased the wheels of progress. Wealth Inequality in America Overwhelmingly now, people who study it empirically think that it’s sand in the wheels. ... Inequality breeds conflict, and conflict breeds wasted resources”

Samuel Bowles,
cited from Economist's View: Inequality and Guard Labor

From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.

Nicholas D. Kristof, NYT, November 6, 2010

Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods

Guard Labor Why is Inequality Bad

If labor is a commodity like any other, who is the idiot in charge of inventory management?.

Economist's View '


Introduction

As aptly noted Neoliberalism – the ideology at the root of all our problems ( The Guardian,  April 15, 2016)

Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you'll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is?

Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises: the financial meltdown of 2007‑8, the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness , the collapse of ecosystems, rejection of the current neoliberal elite by majority of American people and the rise of candidates like Donald Trump . But we respond to these developments as if they emerge in isolation, apparently unaware that they have all been either catalyzed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly? 

One of the key property of neoliberalism is that it recasts inequality as virtuous. The market ensures that everyone gets what they deserve. If you deserve to die, so be it. Of cause that does not apply to the financial oligarchy which is above the law and remains unpunished even for very serious crimes. This fate is reserved for bottom 99% of population.

Neoliberalism sees competition as the defining characteristic of human relations, In other words neoliberal economic model uses "unable to compete in the labor market" label for poor people in the same way Nazi used concept of Untermensch for Slavic people.

That also mean that for those outside top 20% of population the destiny is brutal exploitation not that different then in slave societies. It victimizes and artfully creates complex of inferiority among poor people trying to brainwash that they themselves are guilty in their status and that their children do not deserve better. This is why subsidies for colleges are cut. Unfortunately now even lower middle class is coming under tremendous pressure and essentially is moved into poverty. Disappearance of well-paid middle class "white collar" jobs such as IT jobs and recently oil sector jobs  and conversion of many jobs to temp or to outsourcing/off-shoring model is a fact that can't be denied. Rise in inequality in the USA for that last twenty years of neoliberalism domination is simply dramatic and medial income per family actually dropped.

Everything is moving in the direction of a pretty brutal joke: poor Americans just got a new slave-owners. And now slaves are not distinguished by  the color of their skin.

The economic status of Wal Mart employees (as well as employees of many other retailers, who are predominantly women) are not that different from slaves. In "rich" states like NY and NJ Wal-Mart cashiers are paid around $9 an hour. That's around $18K a year if you can get 40hours a week (big if),  You can't survive on those money living alone and renting an apartment. Two people might be able to survive if they share the apartment costs.  And forget about that if you have a child (aka "single mothers"  as a new face of the US poverty). You can survive only with additional social programs like food stamps. In other words the federal state subsidizes Wal-Mart, increasing their revenue at taxpayers expense.

Piketty thinks a rentier society (which is another definition of neoliberal society) contradicts the meritocratic worldview of democratic societies and is toxic for democracy as it enforces "one dollar one vote" election process (corporation buy politicians; ordinary people just legitimize with their votes pre-selected by elite candidates, see Two Party System as Polyarchy):

 “…no ineluctable force standing in the way to extreme concentration of wealth…if growth slows and the return on capital increases [as] tax competition between nations heats up…Our democratic societies rest on a meritocratic worldview, or at any rate, a meritocratic hope, by which I mean a belief in a society in which inequality is based more on merit and effort than on kinship and rents. This belief and hope play a very crucial role in modern society, for a simple reason: in a democracy the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions, and in order to overcome this contradiction it is vital to make sure that social inequalities derive from ration and universal principles rather than arbitrary contingencies. Inequalities must therefore be just and useful to all, at least in the realm of discourse and as far as possible in reality as well…Durkheim predicted that modern democratic society would not put for long with the existence of inherited wealth and would ultimately see to it that the ownership of property ended at death.” p. 422

A neo-liberal point discussed in Raymond Plant's book on neo-liberalism is that if a fortune has been made through no injustice, then it is OK. So we should not condemn the resulting distribution of wealth, as fantastically concentrated as it may be. That that's not true, as such cases always involve some level of injustice, if only by exploiting some loophole in the current laws. Piketty is correct that to the extent that citizens understood the nature of a rentier society they would rise in opposition to it. The astronomical pay of "super-managers" cannot be justified in meritocratic terms. CEO's can capture boards and force their incentive to grow faster then  company profits. Manipulations with shares buyback are used to meet "targets". So neoliberal extreme is definitely bad.

At the same time we now know the equality if not achievable and communism was a pipe dream that actually inflicted cruelty on a lot of people in the name of unachievable utopia. But does this means that inequality, any level of inequality, is OK. It does not look this way and we can actually argue that extremes meet.

But collapse of the USSR lead to triumph of neoliberalism which is all about rising inequality. Under neoliberalism the wealthy and their academic servants, see inequality as a noble outcome. They want to further enrich top 1%, shrink middle class making it less secure, and impoverish poor. In other words they promote under the disguise of "free market" Newspeak a type of economy which can be called a plantation economy. In this type of the economy all the resources and power are in the hands of a wealthy planter class who then gives preference for easy jobs and the easy life to their loyal toadies. The wealthy elites like cheap labor. And it's much easier to dictate their conditions of employment when unemployment is high. Keynesian economics values the middle class and does not value unemployment or cheap labor. Neoliberals like a system that rewards them for their loyalty to the top 1% with an easier life than they otherwise merit. In a meritocracy where individuals receive public goods and services that allow them to compete on a level playing field, many neoliberal toadies would be losers who cannot compete.

In a 2005 report to investors three analysts at Citigroup advised that “the World is dividing into two blocs—the Plutonomy and the rest … In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer", or indeed the “Russian consumer”.

In other words there are analysts that believe that we are moving to a replay of Middle Ages on a new, global level, were there are only rich who do the lion share of the total consumption and poor, who does not matter.

We can also state, that under neoliberal regime the sources of American economic inequality are largely political. In other words they are the result of deliberate political decision of the US elite to shape markets in neoliberal ways, and dismantle New Deal.

Part of this "shaping the markets in neoliberal ways" was corruption of academic economists. Under neoliberalism most economists are engaged in what John Kenneth Galbraith called "the economics of innocent fraud." With the important correction that there is nothing innocent in their activities. Most of them, especially "neoclassical" economists are prostitutes for financial oligarchy. So their prescription and analysis as for the reasons of high unemployment should be taken with due skepticism.

We also know that power corrupts and absolute power corrupts absolutely. That means that existence of aristocracy might not be optimal for society "at large". But without moderating influence of the existence of the USSR on appetites of the US elite, they engage is audacious struggle for accumulation as much power and wealth as possible. In a way that situation matches the situation in 1920th, which was known to be toxic.

But society slowly but steadily moves in this direction since mid 80th. According to the official wage statistics for 2012 http://www.ssa.gov , 40% of the US work force earned less than $20,000, 53% earned less than $30,000, and 73% earned less than $50,000. The median US wage or salary was $27,519 per year. The amounts are in current dollars and they are "total" compensation amounts subject to state and federal income taxes and to Social Security and Medicare payroll taxes. In other words, the take home pay is less.

In other word the USA is now entered an inequality bubble, the bubble with the financial oligarchy as new aristocracy, which strives for absolute control of all layers of the government. The corruption has a systemic character. It take not only traditional form of the intermarriage between Wall street and DC power brokers (aka revolving doors). It also create a caste of guard labor to protect oligarchy.

New global caste structure and stratification of the US society

Some researchers point out that neoliberal world is increasingly characterized by a three-tiered social structure(net4dem.org):

This process of stratification and fossilization of "haves" and "haves-not" is now pretty much established in the USA. The US population can be partitioned into five distinct classes, or strata:

  1. Lower class (poor) bottom 20%. Those folks have income close to official poverty line, which varies from state to state. In "expensive states" like NJ and NY this category ranks much higher then national level, up to 40%. Official figures from a Census Bureau that state that in 2010 twelve states had poverty rates above 17%, up from five in 2009, while ten metropolitan areas had poverty rates over 18%. Texas had the highest poverty rate, at 33.4%, followed by Fresno, California, at 26.8%.

    According to figures published by the Social Security Administration in October 2011, the median income for American workers in 2010 was $26,364, just slightly above the official poverty level of $22,025 for a family of four. Most single parent families with children fall into this category. Many single earner families belong to this category too.

    The median income figure reflects the fact that salaries of 50% of all workers are less then $26,364 and gives a much truer picture of the real social conditions in the United States than the more widely publicized average income, which was $39,959 in 2010. This figure is considerably higher than median income because the distribution of income is so unequal—a relative handful of ultra-high income individuals pulls up the average.

  2. Lower middle class (60%). Depending on class model used, the middle class may constitute anywhere from 25% to 66% of households. Typically includes households with incomes above $46,326 (all households) or $67,348 (dual earners households) per year. The latter is more realistic. In order for two earners family to qualify each earner should get approximately $34K a year or more ($17 per hour wage with 40 hours workweek). Per household member income is around $23.5K
    The lower middle class... these are people in technical and lower-level management positions who work for those in the upper middle class as lower managers, craftspeople, and the like. They enjoy a reasonably comfortable standard of living, although it is constantly threatened by taxes and inflation. Generally, they have a Bachelor's and sometimes Masters college degree.

    —Brian K. William, Stacy C. Sawyer and Carl M. Wahlstrom, Marriages, Families & Intimate Relationships, 2006 (Adapted from Dennis Gilbert 1997; and Joseph Kahl 1993)[4]

  3. Upper middle class (top 20%). The includes households with incomes above 91K per year.
  4. Upper class (elite): top 1%. Annual comes (AGI) for this group exceed $380K per year. Commonly called multimillionaires (net worth two millions or more). In 2010 controlled at least 25% of total nation income (23.5% in 2007, 8.9% in 1979) . Top 1% owns more than 90% of combined or 33.8% of the nation private wealth.
  5. Super rich (top 0.01%, oligarchs, super-elite, or top 1000 families). A close to this category of super-rich are billionaires. US is home of 425 billionaires, while Russia and China have 95 and 96 correspondingly. The average worth of the world's billionaires is now $3.5 billion, or $500 million more than last year.( Forbes)

Share of consumption for families outside upper middle class (with income, say, below $91K per year (80% of US households) is much less then commonly assumed. That means that in the USA consumer spending are driven by upper class and as such is pretty much isolated from decline of wages of lower 80% of population. The median household income in the United States is around $50K.

Possibility of the return to the clan society

The danger of high level of inequality might be revival of nationalism and return to clan (mafia) society in the form of corporatism or even some form of national socialism. Mark S. Weine made this point in his book The Rule of the Clan. What an Ancient Form of Social Organization Reveals About the Future of Individual Freedom . From one Amazon review:

Weiner's book is more than worth its price simply as an armchair tour of interesting places and cultures and mores, deftly and briefly described. But he has a more serious and important point to make. While the social cohesion that the values of the clan promote is alluring, they are ultimately at odds with the values of individual autonomy that only the much-maligned modern liberal state can offer.

Even the state's modern defenders tend to view it, at best, as a necessary evil. It keeps the peace, upholds (somewhat) international order, and manages the complexity of modern life in ways that allow individuals to get on with their journeys of personal fulfillment.

Weiner shows (in too brief but nevertheless eloquent ways) that this reductive view of the state is insufficient to resist the seductive appeal of the clan, and that it will be for the worse if we can't find ways to combat this allure within the legal structures of modern liberalism.

Read alongside James Ault's masterful participant study of fundamentalist Baptism, Spirit and Flesh, and draw your own conclusions.

Dramatic increase in the use of guard labor and conversion of the state into National Security State

Of course the elite is worried about security of their ill-gotten gains. And that's partially why the USA need such huge totally militarized police force and outsize military. Police and military are typical guard labor, that protects private wealth of the US plutocrats. Add to this equally strong private army of security contractors.

Other suggested that not only the USA, but the global neoliberal society is deeply sick with the same disease that the US society expected in 20th (and like previously with globalism of robber barons age, the triumph of neoliberalism in 1990th was and is a global phenomenon).

High inequality logically leads to dramatic increase of guard labor and inevitable conversion of state into National Security State. Which entail total surveillance over the citizens as a defining factor. Ruling elite is always paranoid, but neoliberal elite proved to be borderline psychopathic. They do not want merely security, they want to crush all the resistance.

Butler Shaffer wrote recently that the old state system in the United States is dying before our very eyes:

A system that insists on controlling others through increasing levels of systematic violence; that loots the many for the aggrandizement of the few; that regulates any expressions of human behavior that are not of service to the rulers; that presumes the power to wage wars against any nation of its choosing, a principle that got a number of men hanged at the Nuremberg trials; and finally, criminalizes those who would speak the truth to its victims, has no moral energy remaining with which to sustain itself.

Low mobility created potential for the degeneration of the elite

It is pretty clear that the USA became a society where there is de facto royalty. In the form of the strata which Roosevelt called "Economic royalists". Jut look at third generation of Walton family or Rocafeller family.

Remember the degenerative Soviet Politburo, or, for a change, unforgettable dyslexic President George W Bush ? The painful truth is that in the most unequal nations including the UK and the US – the intergenerational transmission of income is very strong (in plain language they have a heredity-based aristocracy). See Let them eat cake. In more equal societies such as Denmark, the tendency of privilege to breed privilege is much lower but also exists and is on the rise. As Roosevelt observed in a similar situation of 30th:

These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power.

High inequality undermines social cohesion

Neoliberalism and its ideology(Randism) undermined social cohesion, making society members more hostile to each other and as such less willing to defend the country in case of real danger. Betrayal of the country is no longer an unspeakable crime.

The purpose of government should be to foster a "civil society". The slogan of the "oligarchic right" is "me first", or, as in Paul Ryan's adoration of Ayn Rand, greed is good. Objectivism became kind of new civic religion, with the goal of maximizing the wealth of a single individual at the expense of the civil society is a virtue. And those new social norms (instilled by MSM) allow the fat cats simply to stole from everybody else without fear of punishment. See an outburst from Stephen Schwarzman. If there are two societies inside of the country with bridges burned, the bottom part is less willing to spill blood for the upper part. And having a contractual army has its own set of dangers, as it spirals into high level of militarism (being in war is a new normal for the USA during the last 30 years or so), which while enriching part of the elite bankrupts the country. The quality of roads is a testament of this process.

Countervailing mechanisms and forces are destroyed. Plutocrats now can shape the conversation by buying up newspapers and television channels as well as funding political campaigns. The mousetrap of high inequality became irreversible without external shocks. The more unequal our societies become, the more we all become prisoners of that inequality. The key question is: Has our political system been so degraded by misinformation and disinformation that it can no longer function because it lost the touch with reality? The stream of outright falsehoods that MSM feed the lemmings (aka society members) is clearly politically motivated. But a side effect (externality) of all that brainwashing efforts is that nobody including players at the top of the government now understands what's going on. Look at Obama and Joe Biden.

As the growth of manufacturing base slowed down and return on capital dropped, the elite wants less government social spending. They wants to end popular government programs such as Social Security, no matter how much such cuts would cause economic dislocation and strains in the current social safety net. The claims are that these programs are "Waste" and could be cut without anyone, but the "moochers" noticing the effects. They use the economic strain felt by many in the economy to promote these cuts. They promise that cuts to vital programs will leave more money in the pockets of the average person. In reality, the increase in money will be marginal, but the effects on security and loss of "group purchasing power" economy of scale will make the cuts worse than worthless (Economist's View Paul Krugman Moment of Truthiness)

Two party system makes the mousetrap complete

The US system of voting (winner take all) leads inexorably to Two party system. Third parties are only spoilers. Protest votes in the current system are COUNTERPRODUCTIVE (i.e. they help the evil, not the merely bad). Deliberate and grotesque gerrymandering further dilutes protest votes.

Again, I would like to stress that rich consumers, few in number, getting the gigantic slice of income and the most of consumption (that's why the US consumption was so resilient during two last financial crises). There are the rest, the “non-rich”, accounting for surprisingly small bites of the national pie.

The question arise "Why we should care?". Most of the readers of this page are not at the bottom bracket anyway. Many are pretty high up. Here is one possible answer:

But should we care? There are two reasons we might: process and outcome.

Creating a strata of the outcasts aka permanently unemployed

It is very difficult to understand the real situation with inequality in the USA today without experiencing long term unemployed.

Or if you forced into job of a WalMart cashier or other low paid employee. Job that does not provide a living minimum wage. You need to watch this YouTube video Wealth Inequality in America to understand the reality. The video was posted anonymously by someone using the YouTube handle politizane. It is pretty clear that not only the USA became a society where there is de facto royalty, economic royalty but also a strata of people completely deprived. An Outcaste.

And the royalty became recklessly like it should promoting to the top the likes of recovered alcoholic Bush II or "private equity shark" Romney (and remember who Romney father was).

See Over 50 and unemployed

Education is no longer the answer to rising inequality

In the current circumstances education is no longer the answer to rising inequality. Instead of serving as a social lift it, at least in some cases, became more of a social trap. This is connected with neoliberal transformation of education. With the collapse of post-war public funded educational model and privatization of the University education students face a pretty cruel world. World in which they are cows to milk. Now universities became institutions very similar to McDonalds ( or, in less politically correct terms, Bordellos of Higher Learning). Like McDonalds they need to price their services so that to receive nice profit and they to make themselves more attractive to industry they intentionally feed students with overspecialized curriculum instead of concentrating on fundamentals and the developing the ability to understand the world. Which was a hallmark of university education of the past.

Since 1970th Neo-Liberal University model replaced public funded university model (Dewey model). It is now collapsing as there are not that many students, who are able (and now with lower job prospects and tale of graduates working as bartender, willing) to pay infated tuition fees. That means that higher education again by-and-large became privilege of the rich and upper middle class.

Lower student enrollment first hit minted during dot-com boom expensive private colleges, who hunt for people with government support (such a former members of Arm forces). It remains viable only in elite universities, which traditionally serve the top 1% and rich foreigners. As David Schultz wrote in his article (Logos, 2012):

Yet the Dewey model began to collapse in middle of the 1970s. Perhaps it was the retrenchment of the SUNY and CUNY systems in New York under Governor Hugh Carey in 1976 that began the end of the democratic university. What caused its retrenchment was the fiscal crisis of the 1970s.

The fiscal crisis of the 1970s was born of numerous problems. Inflationary pressures caused by Vietnam and the energy embargoes of the 1970s, and recessionary forces from relative declines in American economic productivity produced significant economic shocks, including to the public sector where many state and local governments edged toward bankruptcy.

Efforts to relieve declining corporate profits and productivity initiated efforts to restructure the economy, including cutting back on government services. The response, first in England under Margaret Thatcher and then in the United States under Ronald Reagan, was an effort to retrench the state by a package that included decreases in government expenditures for social welfare programs, cutbacks on business regulations, resistance to labor rights, and tax cuts. Collectively these proposals are referred to as Neo-liberalism and their aim was to restore profitability and autonomy to free markets with the belief that unfettered by the government that would restore productivity.

Neo-liberalism had a major impact on higher education. First beginning under President Carter and then more so under Ronald Reagan, the federal and state governments cut taxes and public expenditures. The combination of the two meant a halt to the Dewey business model as support for public institutions decreased and federal money dried up.

From a high in the 1960s and early 70s when states and the federal government provided generous funding to expand their public systems to educate the Baby Boomers, state universities now receive only a small percentage of their money from the government. As I pointed out in my 2005 Logos “The Corporate University in American Society” article in 1991, 74% of the funding for public universities came from states, in 2004; it was down to 64%, with state systems in Illinois, Michigan and Virginia down to 25%, 18%, and 8% respectively. Since then, the percentages have shrunk even more, rendering state universities public institutions more in name than in funding.

Higher education under Neo-liberalism needed a new business model and it found it in the corporate university. The corporate university is one where colleges increasingly use corporate structures and management styles to run the university. This includes abandoning the American Association of University Professors (AAUP) shared governance model where faculty had an equal voice in the running of the school, including over curriculum, selection of department chairs, deans, and presidents, and determination of many of the other policies affecting the academy. The corporate university replaced the shared governance model with one more typical of a business corporation.

For the corporate university, many decisions, including increasingly those affecting curriculum, are determined by a top-down pyramid style of authority. University administration often composed not of typical academics but those with business or corporate backgrounds had pre-empted many of the decisions faculty used to make. Under a corporate model, the trustees, increasingly composed of more business leaders than before, select, often with minimal input from the faculty, the president who, in turn, again with minimal or no faculty voice, select the deans, department heads, and other administrative personnel.

University presidents became way too greedy

Neoliberalism professes the idea the personal greed can serve positive society goals, which is reflected in famous neoliberal slogan "greed is good". And university presidents listen. Now presidents of neoliberal universities do not want to get $100K per year salary, they want one, or better several, million dollar salary of the CEO of major corporation (Student Debt Grows Faster at Universities With Highest-Paid Leaders, Study Finds - NYTimes.com)

At the 25 public universities with the highest-paid presidents, both student debt and the use of part-time adjunct faculty grew far faster than at the average state university from 2005 to 2012, according to a new study by the Institute for Policy Studies, a left-leaning Washington research group.

The study, “The One Percent at State U: How University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor,” examined the relationship between executive pay, student debt and low-wage faculty labor at the 25 top-paying public universities.

The co-authors, Andrew Erwin and Marjorie Wood, found that administrative expenditures at the highest-paying universities outpaced spending on scholarships by more than two to one. And while adjunct faculty members became more numerous at the 25 universities, the share of permanent faculty declined drastically.

“The high executive pay obviously isn’t the direct cause of higher student debt, or cuts in labor spending,” Ms. Wood said. “But if you think about it in terms of the allocation of resources, it does seem to be the tip of a very large iceberg, with universities that have top-heavy executive spending also having more adjuncts, more tuition increases and more administrative spending.”

... ... ...

The Chronicle of Higher Education’s annual survey of public university presidents’ compensation, also released Sunday, found that nine chief executives earned more than $1 million in total compensation in 2012-13, up from four the previous year, and three in 2010-11. The median total compensation of the 256 presidents in the survey was $478,896, a 5 percent increase over the previous year.

... ... ...

As in several past years, the highest-compensated president, at $6,057,615 in this period, was E. Gordon Gee, who resigned from Ohio State last summer amid trustee complaints about frequent gaffes. He has since become the president of West Virginia University.

This trick requires dramatic raising of tuition costs. University bureaucracy also got taste for better salaries and all those deans, etc want to be remunerated like vice presidents. So raising the tuition costs became the key existential idea of neoliberal university. Not quality of education, but tuition costs now are the key criteria of success. And if you can charge students $40K per semester it is very, very good. If does not matter that most population get less then $20 an hour.

The same is true for professors, who proved to be no less corruptible. And some of them, such as economic departments, simply serve as prostitutes for financial oligarchy. So they were corrupted even before that rat race for profit. Of course there are exceptions. But they only prove the rule.

As the result university tuition inflation outpaced inflation by leaps and bounds. At some point amount that you pay (and the level of debt after graduation) becomes an important factor in choosing the university. So children of "have" and "have nots" get into different educational institutions and do not meet each other. In a way aristocracy returned via back door.

Neoliberal university professes "deep specialization" to create "ready for the market" graduates. And that creates another problem: education became more like stock market game and that makes more difficult for you to change you specialization late in the education cycle. But early choice entail typical stock market problem: you might miss the peak of the market or worse get into prolonged slump as graduates in finance learned all too well in 2008. That's why it is important not to accumulate too much debt: this is a kind of "all in" play in poker. You essentially bet that in a particular specialty there will be open positions with high salary, when you graduate. If you lose this bet you are done.

As a result of this "reaction to the market trends" by neoliberal universities, when universities bacem appendixes of HR of large corporations students need to be more aware of real university machinery then students in 50th or 60th of the last century. And first of all assume that it is functioning not to their benefits.

One problem for a student is that there are now way too many variables that you do not control. Among them:

On the deep level neoliberal university is not interested to help you to find specialization and place in life where can unleash your talents. You are just a paying customers much like in McDonalds, and university interests are such they might try to push you in wrong direction or load you with too much debt.

If there is deep mismatch as was with computer science graduates after crash of dot-com boom, or simply bad job market due to economy stagnation and you can't find the job for your new specialty (or if you got "junk" specialty with inherent high level of unemployment among professionals) and you have substantial education debt, then waiting tables or having some other MacJob is a real disaster for you. As with such selaries you simply can't pay it back. So controlling the level of debt is very important and in this sence parents financial help is now necessary. In other words education became more and more "rich kids game".

That does not mean that university education should be avoided for those from families with modest means. On the contrary it provides unique experience and help a person to mature in multiple ways difficult to achieve without it. It is still one of the best ways to get vertical mobility. But unless parents can support you you need to try to find the most economical way to obtain it without acquiring too much debt. This is you first university exam. And if you fail it you are in trouble.

For example, computer science education is a great way to learn quite a few things necessary for a modern life. But the price does matter and prestige of the university institution that you attend is just one of the factors you should consider in your evaluation. It should not be the major factor ("vanity fair") unless your parents are rich and can support you. If you are good you can get later a master degree in a prestigious university after graduation from a regular college. Or even Ph.D.

County colleges are greatly underappreciated and generally provide pretty high standard of education, giving ability to students to save money for the first two years before transferring to a four year college. They also smooth the transition as finding yourself among people who are only equal or superior then you (and have access to financial respource that you don't have) is a huge stress. The proverb say that it is better to be first in the village then last in the town has some truth in it. Prestigious universities might provide a career boost (high fly companies usually accept resumes only from Ivy League members), but they cost so much that you need to be a son or daughter of well-to-do parents to feel comfortably in them. Or extremely talented. Also amount of career boost that elite universities provide depends on whom your parents are and what connections they have. It does not depend solely on you and the university. Again, I would like to stress that you should resist "vanity fair" approach to your education: a much better way is to try to obtain BS in a regular university and them try to obtain MS and then, if you are good, PHD, in a prestigious university. Here is a fragment of an interesting discussion that covers this topic (Low Mobility Is Not a Social Tragedy?, Feb 13, 2013 ; I recommend you to read the whole discussion ):

kievite:

I would like to defend Greg Clack.

I think that Greg Clack point is that the number of gifted children is limited and that exceptionally gifted children have some chance for upper move in almost all, even the most hierarchical societies (story of Alexander Hamilton was really fascinating for me, the story of Mikhail Lomonosov http://en.wikipedia.org/wiki/Mikhail_Lomonosov was another one -- he went from the very bottom to the top of Russian aristocracy just on the strength of his abilities as a scientist). In no way the ability to "hold its own" (typical for rich families kids) against which many here expressed some resentment represents social mobility. But the number of kids who went down is low -- that's actually proves Greg Clack point:

(1) Studies of social mobility using surnames suggest two things. Social mobility rates are much lower than conventionally estimated. And social mobility rates estimated in this way vary little across societies and time periods. Sweden is no more mobile than contemporary England and the USA, or even than medieval England. Social mobility rates seem to be independent of social institutions (see the other studies on China, India, Japan and the USA now linked here).

Francisco Ferreira rejects this interpretation, and restates the idea that there is a strong link between social mobility rates and inequality in his interesting post.

What is wrong with the data Ferreira cites? Conventional estimates of social mobility, which look at just single aspects of social status such as income, are contaminated by noise. If we measure mobility on one aspect of status such as income, it will seem rapid.

But this is because income is a very noisy measure of the underlying status of families. The status of families is a combination of their education, occupation, income, wealth, health, and residence. They will often trade off income for some other aspect of status such as occupation. A child can be as socially successful as a low paid philosophy professor as a high paid car salesman. Thus if we measure just one aspect of status such as income we are going to confuse the random fluctuations of income across generations, influenced by such things as career choices between business and philosophy, with true generalised social mobility.

If these estimates of social mobility were anywhere near correct as indicating true underlying rates of social mobility, then we would not find that the aristocrats of 1700 in Sweden are still overrepresented in all elite occupations of Sweden. Further, the more equal is income in a society, the less signal will income give of the true social status of families. In a society such as Sweden, where the difference in income between bus drivers and philosophy professors is modest, income tells us little about the social status of families. It is contaminated much more by random noise. Thus it will appear if we measure social status just by income that mobility is much greater in Sweden than in the USA, because in the USA income is a much better indicator of the true overall status of families.

The last two paragraphs of Greg Clark article cited by Mark Thoma are badly written and actually are somewhat disconnected with his line of thinking as I understand it as well as with the general line of argumentation of the paper.

Again, I would like to stress that a low intergenerational mobility includes the ability of kids with silver spoon in their mouth to keep a status close to their parent. The fact that they a have different starting point then kids from lower strata of society does not change that.

I think that the key argument that needs testing is that the number of challengers from lower strata of the society is always pretty low and is to a large extent accommodated by the societies we know (of course some societies are better then others).

Actually it would be interesting to look at the social mobility data of the USSR from this point of view.

But in no way, say, Mark Thoma was a regular kid, although circumstances for vertical mobility at this time were definitely better then now. He did possessed some qualities which made possible his upward move although his choice of economics was probably a mistake ;-).

Whether those qualities were enough in more restrictive environments we simply don't know, but circumstances for him were difficult enough as they were.

EC -> kievite...

"the number of gifted children is limited"

I stopped reading after that. I teach at a high school in a town with a real mix of highly elite families, working class families, and poor families, and I can tell you that the children of affluent parents are not obviously more gifted than the children of poor families. They do, however, have a lot more social capital, and they have vastly more success. But the limitations on being "gifted" are irrelevant.

According to an extensive study (Turkheimer et al., 2003) of 50,000 pregnant women and the children they went on to have (including enough sets of twins to be able to study the role of innate genetic differences), variation in IQ among the affluent seems to be largely genetic.

Among the poor, however, IQ has very little to do with genes -- probably because the genetic differences are swamped and suppressed by the environmental differences, as few poor kids are able to develop as fully as they would in less constrained circumstances.

kievite -> EC...

All you said is true. I completely agree that "...few poor kids are able to develop as fully as they would in less constrained circumstances." So there are losses here and we should openly talk about them.

Also it goes without saying that social capital is extremely important for a child. That's why downward mobility of children from upper classes is suppressed, despite the fact that some of them are plain vanilla stupid.

But how this disproves the point made that "exceptionally gifted children have some chance for upper move in almost all, even the most hierarchical societies"? I think you just jumped the gun...

mrrunangun:

The early boomers benefitted from the happy confluence of the postwar boom, LBJ's Great Society efforts toward financial assistance for those seeking to advance their educations, and the 1964 Civil Rights Act which opened opportunities for marginalized social groups in institutions largely closed to them under the prewar social customs in the US.

The US Supreme Court is made up of only Jews and Catholics as of this writing, a circumstance inconceivable in the prewar America. Catholics were largely relegated to separate and unequal institutions. Jews' opportunities were limited by quotas and had a separate set of institutions of their own where their numbers could support such. Where their numbers were not sufficient, they were often relegated to second rate institutions.

Jewish doctors frequently became the leading men in the Catholic hospitals in Midwestern industrial towns where they were unwelcome in the towns' main hospitals. Schools, clubs, hospitals, professional and commercial organizations often had quota or exclusionary policies. Meritocracy has its drawbacks, but we've seen worse in living memory.

College textbook publishing became a racket with the growth of neoliberalism. That means at least since 1980. And it is pretty dirty racket with willing accomplishes in form of so called professors like Greg Mankiw. For instance, you can find a used 5th edition Mankiw introductory to Microeconomics for under $4.00, while a new 7th edition costs over $200. An interesting discussion of this problem can be found at Thoughts on High-Priced Textbooks'

See Slightly Skeptical View on University Education

New generation of robber barons: US oligarchy never was so audacious

As Jesse aptly noted at his blog post Echoes of the Past In The Economist - The Return of the Übermenschen the US oligarchy never was so audacious.

And it is as isolated as the aristocracies of bygone days, isolation reinforced by newly minted royalty withdrawal into gated estates, Ivy League Universities, and private planes.

They are not openly suggesting that no child should rise above the status of parents, presumably in terms of wealth, education, and opportunity. But their policies are directed toward this goal. If you are born to poor parents in the USA, all bets are off -- your success is highly unlikely, and your servile status, if not poverty is supposedly pre-destined by poor generic material that you got.

This is of course not because the children of the elite inherit the talent, energy, drive, and resilience to overcome the many obstacles they will face in life from their parents. Whatever abilities they have (and regression to the mean is applicable to royalty children too), they are greatly supplemented, of course, by the easy opportunities, valuable connections, and access to power. That's why the result of SAT in the USA so strongly correlated with the wealth of parents. And a virtual freedom from prosecution does not hurt either, in case they have inherited a penchant for sociopathy, or something worse, along with their many gifts.

The view that the children of the poor will not do well, because they are genetically inferior became kind of hidden agenda. These are the pesky 99% just deserve to be cheated and robbed by the elite, because of the inherent superiority of the top one percent. There is no fraud in the system, only good and bad breeding, natural predators and prey.

This line of thinking rests on the assumption that I succeed, therefore I am. And if you do not, well, so be it. You will be low-paid office slave or waiter in McDonalds with a college diploma as it is necessary for the maximization of profits of the elite. There is no space at the top for everybody. Enjoy the ride... Here is an typical expression of such views:

"Many commentators automatically assume that low intergenerational mobility rates represent a social tragedy. I do not understand this reflexive wailing and beating of breasts in response to the finding of slow mobility rates.

The fact that the social competence of children is highly predictable once we know the status of their parents, grandparents and great-grandparents is not a threat to the American Way of Life and the ideals of the open society

The children of earlier elites will not succeed because they are born with a silver spoon in their mouth, and an automatic ticket to the Ivy League.

They will succeed because they have inherited the talent, energy, drive, and resilience to overcome the many obstacles they will face in life. Life is still a struggle for all who hope to have economic and social success. It is just that we can predict who will be likely to possess the necessary characteristics from their ancestry."

Greg Clark, The Economist, 13 Feb. 2013

Mr. Clark is now a professor of economics and was the department chair until 2013 at the University of California, Davis. His areas of research are long term economic growth, the wealth of nations, and the economic history of England and India.

And another one:

"During this time, a growing professional class believed that scientific progress could be used to cure all social ills, and many educated people accepted that humans, like all animals, were subject to natural selection.

Darwinian evolution viewed humans as a flawed species that required pruning to maintain its health. Therefore negative eugenics seemed to offer a rational solution to certain age-old social problems."

David Micklos, Elof Carlson, Engineering American Society: The Lesson of Eugenics

If we compare this like of thinking with the thinking of eightieth century and you will see that the progress is really limited:

“With savages, the weak in body or mind are soon eliminated; and those that survive commonly exhibit a vigorous state of health. We civilized men, on the other hand, do our utmost to check the process of elimination; we build asylums for the imbecile, the maimed, and the sick; we institute poor-laws; and our medical men exert their utmost skill to save the life of every one to the last moment.

There is reason to believe that vaccination has preserved thousands, who from a weak constitution would formerly have succumbed to small-pox. Thus the weak members of civilised societies propagate their kind. No one who has attended to the breeding of domestic animals will doubt that this must be highly injurious to the race of man.

It is surprising how soon a want of care, or care wrongly directed, leads to the degeneration of a domestic race; but excepting in the case of man himself, hardly any one is so ignorant as to allow his worst animals to breed.

The aid which we feel impelled to give to the helpless is mainly an incidental result of the instinct of sympathy, which was originally acquired as part of the social instincts, but subsequently rendered, in the manner previously indicated, more tender and more widely diffused. Nor could we check our sympathy, if so urged by hard reason, without deterioration in the noblest part of our nature. The surgeon may harden himself whilst performing an operation, for he knows that he is acting for the good of his patient; but if we were intentionally to neglect the weak and helpless, it could only be for a contingent benefit, with a certain and great present evil.

Hence we must bear without complaining the undoubtedly bad effects of the weak surviving and propagating their kind; but there appears to be at least one check in steady action, namely the weaker and inferior members of society not marrying so freely as the sound; and this check might be indefinitely increased, though this is more to be hoped for than expected, by the weak in body or mind refraining from marriage.”

Charles Darwin, The Descent of Man

So all this screams of MSM about dropping consumer spending is just a smoke screen. In oligarchic republic which USA represents, consumption is heavily shifted to top 20% and as such is much less dependent of the conditions of the economy. And top 20% can afford $8 per gallon gas (European price) without any problems.

John Barkley Rosser, Jr. With Marina V. Rosser and Ehsan Ahmed, argued for a two-way positive link between income inequality (economic inequality) and the size of an underground economy in a nation (Rosser, Rosser, and Ahmed, 2000).

Globally in 2005, top fifth (20%) of the world accounted for 76.6% of total private consumption (20:80 Pareto rule). The poorest fifth just 1.5%. I do not think the USA differs that much from the rest of the world.

Citigroup Plutonomy Research reports

There was two famous Citigroup Plutonomy research reports (2005 and 2006) featured in in Capitalism: A Love Story . Here is how Yves Smith summarized the findings (in her post High Income Disparity Leads to Low Savings Rates)

On the one hand, the authors, Ajay Kapur, Niall Macleod, and Narendra Singh get some credit for addressing a topic surprisingly ignored by mainstream economists. There have been some noteworthy efforts to measure the increase in concentration of income and wealth in the US most notably by Thomas Piketty and Edmund Saez. But while there have been some efforts to dispute their findings (that the rich, particularly the top 1%, have gotten relatively MUCH richer in the last 20 years), for the most part discussions of what to make of it (as least in the US) have rapidly descended into theological debates. One camp laments the fall in economic mobility (a predictable side effect), the corrosive impact of perceived unfairness, and the public health costs (even the richest in high income disparity countries suffer from shortened life spans). The other camp tends to focus on the Darwinian aspects, that rising income disparity is the result of a vibrant, open economy, and the higher growth rates that allegedly result will lift help all workers.

Yet as far as I can tell, there has been virtually no discussion of the macroeconomy effects of rising income and wealth disparities, or to look into what the implications for investment strategies might be. One interesting effect is that with rising inequality the share of "guard labor" grows very quickly and that puts an upper limit on the further growth of inequality (half of the citizens cannot be guards protecting few billionaires from the other half).

Now the fact that the Citi team asked a worthwhile question does not mean they came up with a sound answer. In fact, he reports are almost ludicrously funny in the way they attempt to depict what they call plutonomy as not merely a tradeable trend (as in leading to some useful investment ideas), but as a Brave New Economy development. I haven't recalled such Panglossian prose since the most delirious days of the dot-com bubble:

We will posit that:

1) the world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S.

What are the common drivers of Plutonomy? Disruptive technology-driven productivity gains, creative financial innovation, capitalist-friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law, and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time…..Most “Global Imbalances” (high current account deficits and low savings rates, high consumer debt levels in the Anglo-Saxon world, etc) that continue to (unprofitably) preoccupy the world’s intelligentsia look a lot less threatening when examined through the prism of plutonomy. The risk premium on equities that might derive from the dyspeptic “global imbalance” school is unwarranted – the earth is not going to be shaken off its axis, and sucked into the cosmos by these “imbalances”. The earth is being held up by the muscular arms of its entrepreneur-plutocrats, like it, or not..

Yves here. Translation: plutonomy is such a great thing that the entire stock market would be valued higher if everyone understood it. And the hoops the reports go through to defend it are impressive. The plutomony countries (the notorious Anglo-Saxon model, the US, UK, Canada and Australia) even have unusually risk-seeking populations (and that is a Good Thing):

…a new, rather out-of-the box hypothesis suggests that dopamine differentials can explain differences in risk-taking between societies. John Mauldin, the author of “Bulls-Eye Investing” in an email last month cited this work. The thesis: Dopamine, a pleasure-inducing brain chemical, is linked with curiosity, adventure, entrepreneurship, and helps drive results in uncertain environments. Populations generally have about 2% of their members with high enough dopamine levels with the curiosity to emigrate. Ergo, immigrant nations like the U.S. and Canada, and increasingly the UK, have high dopamine-intensity populations.

Yves here. What happened to “Give me your tired, your poor/Your huddled masses yearning to breathe free/The wretched refuse of your teeming shore”? Were the Puritans a high dopamine population? Doubtful. How about the Irish emigration to the US, which peaked during its great famine?

Despite a good deal of romanticization standing in for analysis, the report does have one intriguing, and well documented finding: that the plutonomies have low savings rates. Consider an fictional pep rally chant:

We’re from Greenwich
We’re invincible
Living off our income
Never touch the principal

Think about that. If you are rich, you can afford to spend all your income. You don’t need to save, because your existing wealth provides you with a more than sufficient cushion.

The ramifications when you have a high wealth concentration are profound. From the October 2005 report:

In a plutonomy, the rich drop their savings rate, consume a larger fraction of their bloated, very large share of the economy. This behavior overshadows the decisions of everybody else. The behavior of the exceptionally rich drives the national numbers – the “appallingly low” overall savings rates, the “over-extended consumer”, and the “unsustainable” current accounts that accompany this phenomenon….

Feeling wealthier, the rich decide to consume a part of their capital gains right away. In other words, they save less from their income, the wellknown wealth effect. The key point though is that this new lower savings rate is applied to their newer massive income. Remember they got a much bigger chunk of the economy, that’s how it became a plutonomy. The consequent decline in absolute savings for them (and the country) is huge when this happens. They just account for too large a part of the national economy; even a small fall in their savings rate overwhelms the decisions of all the rest.

Yves here. This account rather cheerily dismisses the notion that there might be overextended consumers on the other end of the food chain. Unprecedented credit card delinquencies and mortgage defaults suggest otherwise. But behaviors on both ends of the income spectrum no doubt played into the low-savings dynamic: wealthy who spend heavily, and struggling average consumers who increasingly came to rely on borrowings to improve or merely maintain their lifestyle. And let us not forget: were encouraged to monetize their home equity, so they actually aped the behavior of their betters, treating appreciated assets as savings. Before you chide people who did that as profligate (naive might be a better characterization), recall that no one less than Ben Bernanke was untroubled by rising consumer debt levels because they also showed rising asset levels. Bernanke ignored the fact that debt needs to be serviced out of incomes, and households for the most part were not borrowing to acquire income-producing assets. So unless the rising tide of consumer debt was matched by rising incomes, this process was bound to come to an ugly end.

Also under Bush country definitely moved from oligarchy to plutocracy. Bush openly claimed that "have more" is his base. The top 1% of earners have captured four-fifths of all new income.

An interesting question is whether the extremely unequal income distribution like we have now make the broader society unstable. Or plebs is satisfied with "Bread and circuses" (aka house, SUV, boat, Daytona 500 and 500 channels on cable) as long as loot from the other parts of the world is still coming...

What is the upper limit of inequality?

Martin Bento in his response to Risk Pollution, Market Failure & Social Justice — Crooked Timber made the following point:

Donald made a point I was going to. I would go a bit further though. It’s not clear to me that economic inequality is not desired for its own sake by the some of the elite. After all, studies suggest that once you get past the level of income needed for a reasonably comfortable life – about $40K for a single person in the US - the quest for money is mostly about status.

Meeting your needs is not necessarily zero sum, but status is: my status can only be higher than yours to the extent that yours is lower than mine.

The more inequality there is, the more status differentiation there is. Of course, there are other sources of status than money, but I’m talking specifically about people who value money for the status it confers. This is in addition to the “Donner Party Conservatism” calls to make sure the incentives to work are as strong as possible (to be fair, I think tolerating some inequality for the sake of incentives is worthwhile, but we seem to be well beyond that).

For example currently the USA is No.3 in Gini measured inequality (cyeahoo, Oct 16, 2009), but still the society is reasonably stable:

Gini score: 40.8
GDP 2007 (US$ billions): 13,751.4
Share of income or expenditure (%)
Poorest 10%: 1.9
Richest 10%: 29.9
Ratio of income or expenditure, share of top 10% to lowest 10%: 15.9

What is really surprising is how low the average American salary is: just $26,352 or ~$2,200 a month. This is equal approximately to $13 an hour.

At the same time:

Some interesting facts about upper class (top 1% of the US population). First of all this is pretty self-isolated group (a nation within a nation). They associate almost exclusively with members of their own social and economic standing, few members of the bottom 90% of Americans have ever even personally met a member of the upper class.

Now about top 400:

Here are some interesting hypothesis about affect of inequality of the society:

Higher inequality is somewhat connected with imperial outreach. As Kevin de Bruxelles noted in comment to What collapsing empire looks like - Glenn Greenwald - Salon.com

I’m surprised a thoughtful guy like Glenn Greenwald would make such an unsubstantiated link between collapsing public services for American peasants and a collapse of America’s global (indirect) imperial realm. Is there really a historic link between the quality of a nation’s services to its citizens and its global power? If so the Scandinavian countries would have been ruling the world for the past fifty years. If anything there is probably a reverse correlation. None of the great historic imperial powers, such as the British, Roman, Spanish, Russian, Ottoman, Mongolian, Chinese, Islamic, or Persian, were associated with egalitarian living conditions for anyone outside of the elite. So from a historic point of view, the ability to divert resources away from the peasants and towards the national security state is a sign of elite power and should be seen as a sign increased American imperial potential.

Now if America’s global power was still based on economic production then an argument could be made that closing libraries and cancelling the 12th grade would lower America’s power potential. But as we all know that is no longer the case and now America’s power is as the global consumer of excess production. Will a dumber peasantry consume even more? I think there is a good chance that the answer is yes.

Now a limit could be reached to how far the elite can lower their peasant’s standard of living if these changes actually resulted in civil disorder that demanded much energy for American elites to quell. But so far that is far from the case. Even a facile gesture such as voting for any other political party except the ruling Republicrats seems like a bridge too far for 95% of the peasants to attempt. No, the sad truth is that American elites, thanks to their exceptional ability to deliver an ever increasing amount of diverting bread and circuses, have plenty of room to further cut standards of living and are nowhere near reaching any limits.

What the reductions in economic and educational options will result in are higher quality volunteers into America’s security machinery, which again obviously raise America’s global power potential. This, along with an increasingly ruthless elite, should assure that into the medium term America’s powerful position will remain unchallenged. If one colors in blue on a world map all the countries under de facto indirect US control then one will start to realize the extent of US power. The only major countries outside of US control are Iran, North Korea, Syria, Cuba, and Venezuela. Iraq and Afghanistan are recent converts to the blue column but it far from certain whether they will stay that way. American elites will resist to the bitter end any country falling from the blue category. But this colored world map is the best metric for judging US global power.

In the end it’s just wishful thinking to link the declining of the American peasant’s standard of living with a declining of the American elite’s global power. I wouldn’t be surprised to see this proven in an attack on Iran in the near future.

High inequality and organized crime

Higher pay inequality feeds organized crime (and here we assume that banksters are different from the organized crime, which is probably a very weak hypothesis ;-). That's why Peter Drucker was probably right. He thought that top execs shouldn't get more than 25 times the average salary in the company (which would cap it around $2 millions). I would suggest a metric based on multiple from the average of lower 50% full time jobs for a particular firm (for example in Wal Mart that would cashers and cleaners, people who are living in Latin American style poverty, if they are single mothers as many are). One of the particular strengths of the idea of the maximum wage base on average of lower 50% of salaries is that if senior managers want to increase their own pay, they have to increase that of the lower-paid employees too.

And in a way financial industry itself became an organized crime. The notion of exorbitant wages prevalent in financial industry (and, before it, pioneered by in high-tech companies during dot-com boom via stock options) is based on the idea that some people are at least hundred times more productive then the others. In some professions like programming this is true and such people do exists. But any sufficiently large company is about team work. No matter what job a person does and no matter how many hours they work, there is no possible way that an single individual will create a whole product. It's a team effort. That means that neither skill nor expertise or intelligence can justify the payment of 200, 300 or even 400 times the wages of the lowest-paid 20% workers in any large organization.

This is especially questionable for financial professionals because by and large they are engaged in non-productive. often harmful for the society as whole redistribution activities, the same activities that organized crime performs. Moreover, modern traders are actually play a tremendously destructive role as subprime crisis (and before it saving and loans debacle) aptly demonstrated. which make them indistinguishable in this societal roles from cocaine pushers on the streets.

Drucker's views on the subject are probably worth revisiting. Rick Wartzman wrote in his Business Week article Put a Cap on CEO Pay' that "those who understand that what comes with their authority is the weight of responsibility, not "the mantle of privilege," as writer and editor Thomas Stewart described Drucker's view. It's their job "to do what is right for the enterprise—not for shareholders alone, and certainly not for themselves alone."

Large pay also attracts sociopathic personalities. Sociopathic personalities at the top of modern organizations is another important but rarely discussed danger.

"I'm not talking about the bitter feelings of the people on the plant floor," Drucker told a reporter in 2004. "They're convinced that their bosses are crooks anyway. It's the mid-level management that is incredibly disillusioned" by CEO compensation that seems to have no bounds. " This is especially true, Drucker explained in an earlier interview, when CEOs pocket huge sums while laying off workers. That kind of action, he said, is "morally unforgivable." There can be exceptions but they should be in middle management not in top management ranks.

Put it all together, and the picture became really discouraging. We have an ill-informed or misinformed electorate, politicians who gleefully add to the misinformation, watchdogs who are afraid to bark and guards on each and every corner. Mousetrap is complete.

Recommended Books

Winner-Take-All Politics How Washington Made the Rich Richer -- and Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

Henry J. Farrell

Transforming American politics, September 16, 2010

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover) This is a transformative book. It's the best book on American politics that I've read since Rick Perlstein's Before the Storm. Not all of it is original (the authors seek to synthesize others' work as well as present their own, but provide due credit where credit is due). Not all of its arguments are fully supported (the authors provide a strong circumstantial case to support their argument, but don't have smoking gun evidence on many of the relevant causal relations). But it should transform the ways in which we think about and debate the political economy of the US.

The underlying argument is straightforward. The sources of American economic inequality are largely political - the result of deliberate political decisions to shape markets in ways that benefit the already-privileged at the expense of a more-or-less unaware public. The authors weave a historical narrative which Kevin Drum (who says the same things that I am saying about the book's importance) summarizes cogently here. This is not necessarily original - a lot of leftwing and left-of-center writers have been making similar claims for a long time. What is new is both the specific evidence that the authors use, and their conscious and deliberate effort to reframe what is important about American politics.

First - the evidence. Hacker and Pierson draw on work by economists like Picketty and Saez on the substantial growth in US inequality (and on comparisons between the US and other countries), but argue that many of the explanations preferred by economists (the effects of technological change on demand for skills) simply don't explain what is going on. First, they do not explain why inequality is so top-heavy - that is, why so many of the economic benefits go to a tiny, tiny minority of individuals among those with apparently similar skills. Second, they do not explain cross national variation - why the differences in the level of inequality among advanced industrialized countries, all of which have gone through more-or-less similar technological shocks, are so stark. While Hacker and Pierson agree that technological change is part of the story, they suggest that the ways in which this is channeled in different national contexts is crucial. And it is here that politics plays a key role.

Many economists are skeptical that politics explains the outcome, suggesting that conventional forms of political intervention are not big enough to have such dramatic consequences. Hacker and Pierson's reply implicitly points to a blind spot of many economists - they argue that markets are not `natural,' but instead are constituted by government policy and political institutions. If institutions are designed one way, they result in one form of market activity, whereas if they are designed another way, they will result in very different outcomes. Hence, results that appear like `natural' market operations to a neo-classical economist may in fact be the result of political decisions, or indeed of deliberate political inaction. Hacker and Pierson cite e.g. the decision of the Clinton administration not to police derivatives as an example of how political coalitions may block reforms in ways that have dramatic economic consequences.

Hence, Hacker and Pierson turn to the lessons of ongoing political science research. This is both a strength and a weakness. I'll talk about the weakness below - but I found the account of the current research convincing, readable and accurate. It builds on both Hacker and Pierson's own work and the work of others (e.g. the revisionist account of American party structures from Zaller et al. and the work of Bartels). This original body of work is not written in ways that make it easily accessible to non-professionals - while Bartels' book was both excellent and influential, it was not an easy read. Winner-Take-All Politics pulls off the tricky task of both presenting the key arguments underlying work without distorting them and integrating them into a highly readable narrative.

As noted above, the book sets out (in my view quite successfully) to reframe how we should think about American politics. It downplays the importance of electoral politics, without dismissing it, in favor of a focus on policy-setting, institutions, and organization.

In Hacker and Pierson's account, these three together account for the systematic political bias towards greater inequality. In simplified form: Organizations - and battles between organizations over policy as well as elections - are the structuring conflicts of American politics. The interests of the rich are represented by far more powerful organizations than the interests of the poor and middle class. The institutions of the US provide these organizations and their political allies with a variety of tools to promote new policies that reshape markets in their interests. This account is in some ways neo-Galbraithian (Hacker and Pierson refer in passing to the notion of `countervailing powers'). But while it lacks Galbraith's magisterial and mellifluous prose style, it is much better than he was on the details.

Even so (and here begin the criticisms) - it is not detailed enough. The authors set the book up as a whodunit: Who or what is responsible for the gross inequalities of American economic life? They show that the other major suspects have decent alibis (they may inadvertently have helped the culprit, but they did not carry out the crime itself. They show that their preferred culprit had the motive and, apparently, the means. They find good circumstantial evidence that he did it. But they do not find a smoking gun. For me, the culprit (the American political system) is like OJ. As matters stand, I'm pretty sure that he committed the crime. But I'm not sure that he could be convicted in a court of law, and I could be convinced that I was wrong, if major new exculpatory evidence was uncovered.

The lack of any smoking gun (or, alternatively, good evidence against a smoking gun) is the direct result of a major failure of American intellectual life. As the authors observe elsewhere, there is no field of American political economy. Economists have typically treated the economy as non-political. Political scientists have typically not concerned themselves with the American economy. There are recent efforts to change this, coming from economists like Paul Krugman and political scientists like Larry Bartels, but they are still in their infancy. We do not have the kinds of detailed and systematic accounts of the relationship between political institutions and economic order for the US that we have e.g. for most mainland European countries. We will need a decade or more of research to build the foundations of one.

Hence, while Hacker and Pierson show that political science can get us a large part of the way, it cannot get us as far as they would like us to go, for the simple reason that political science is not well developed enough yet. We can identify the causal mechanisms intervening between some specific political decisions and non-decisions and observed outcomes in the economy. We cannot yet provide a really satisfactory account of how these particular mechanisms work across a wider variety of settings and hence produce the general forms of inequality that they point to. Nor do we yet have a really good account of the precise interactions between these mechanisms and other mechanisms.

None of this is to discount the importance of this book. If it has the impact it deserves, it will transform American public arguments about politics and policymaking. I cannot see how someone who was fair minded could come away from reading this book and not be convinced that politics plays a key role in the enormous economic inequality that we see. And even if it is aimed at a general audience, it also challenges academics and researchers in economics, political science and economic sociology both to re-examine their assumptions about how economics and politics work, and to figure out ways better to engage with the key political debates of our time as Hacker and Pierson have done. If you can, buy it.

Great Faulkner's Ghost (Washington, DC)

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover) Many people have observed that American politics and the American economy reached some kind of turning point around 1980, which conveniently marks the election of Ronald Reagan. Some also pointed to other factors such as the deregulation of stock brokerage commissions in 1975 and the high inflation of the 1970s. Other analysts have put the turning point back in 1968, when Richard Nixon became President on the back of a wave of white, middle-class resentment against the 1960s. Hacker and Pierson, however, point the finger at the 1970s. As they describe in Chapter 4, the Nixon presidency saw the high-water market of the regulatory state; the demise of traditional liberalism occurred during the Carter administration, despite Democratic control of Washington, when highly organized business interests were able to torpedo the Democratic agenda and begin the era of cutting taxes for the rich that apparently has not yet ended today.

Why then? Not, as popular commentary would have it, because public opinion shifted. Hacker and Pierson cite studies showing that public opinion on issues such as inequality has not shifted over the past thirty years; most people still think society is too unequal and that taxes should be used to reduce inequality. What has shifted is that Congressmen are now much more receptive to the opinions of the rich, and there is actually a negative correlation between their positions and the preferences of their poor constituents (p. 111). Citing Martin Gilens, they write, "When well-off people strongly supported a policy change, it had almost three times the chance of becoming law as when they strongly opposed it. When median-income people strongly supported a policy change, it had hardly any greater chance of becoming law than when they strongly opposed it" (p. 112). In other words, it isn't public opinion, or the median voter, that matters; it's what the rich want.

That shift occurred in the 1970s because businesses and the super-rich began a process of political organization in the early 1970s that enabled them to pool their wealth and contacts to achieve dominant political influence (described in Chapter 5). To take one of the many statistics they provide, the number of companies with registered lobbyists in Washington grew from 175 in 1971 to nearly 2,500 in 1982 (p. 118). Money pouring into lobbying firms, political campaigns, and ideological think tanks created the organizational muscle that gave the Republicans a formidable institutional advantage by the 1980s. The Democrats have only reduced that advantage in the past two decades by becoming more like Republicans-more business-friendly, more anti-tax, and more dependent on money from the super-rich. And that dependency has severely limited both their ability and their desire to fight back on behalf of the middle class (let alone the poor), which has few defenders in Washington.

At a high level, the lesson of Winner-Take-All Politics is similar to that of 13 Bankers: when looking at economic phenomena, be they the financial crisis or the vast increase in inequality of the past thirty years, it's politics that matters, not just abstract economic forces. One of the singular victories of the rich has been convincing the rest of us that their disproportionate success has been due to abstract economic forces beyond anyone's control (technology, globalization, etc.), not old-fashioned power politics. Hopefully the financial crisis and the recession that has ended only on paper (if that) will provide the opportunity to teach people that there is no such thing as abstract economic forces; instead, there are different groups using the political system to fight for larger shares of society's wealth. And one group has been winning for over thirty years.

Citizen John (USA)

In Winner-Take-All Politics, two political science professors explain what caused the Middle Class to become vulnerable. Understanding this phenomenon is the Holy Grail of contemporary economics in the U.S.

Some may feel this book is just as polarizing as the current state of politics and media in America. The decades-long decline in income taxes of wealthy individuals is cited in detail. Wage earners are usually subjected to the FICA taxes against all their ordinary income (all or almost their entire total income). But the top wealthy Americans may have only a small percentage (or none) of their income subjected to FICA taxes. Thus Warren Buffett announced that he pays a lower tax rate than his secretary. Buffett has cited income inequality for "poisoning democracy."

When you search the Net for Buffett quotes on inequality, you get a lot of results showing how controversial he became for stating the obvious. Drawing attention to the inequity of the tax regime won him powerful enemies. Those same people are not going to like the authors for writing Winner-Take-All. They say these political science people are condescending because they presume to tell people their political interests.

Many of studies of poverty show how economic and political policies generally favor the rich throughout the world, some of which are cited in this book. Military spending and financial bailouts in particular favor the wealthy. Authors Jacob Hacker and Paul Pierson document a long U.S. policy trend favoring wealthy Americans. This trend resulted in diminished middle class access to quality healthcare and education, making it harder to keep up with the wealthy in relative terms. Further, once people have lost basic foundations of security, they are less willing and able to take on more risk in terms of investing or starting a business.

The rise of special interests has been at the expense of the middle class, according to the authors. Former President Carter talked about this and was ridiculed. Since then government has grown further from most of us. Even federal employees are not like most of us anymore. In its August 10, 2010 issue, USA Today discussed government salaries: "At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds."

An excellent documentary showing how difficult it is to address income inequality is One Percent, by Jamie Johnson of the Johnson & Johnson family. Collapse: How Societies Choose to Fail or Succeed, by Pulitzer Prize-winner Jared Diamond Collapse: How Societies Choose to Fail or Succeed shows examples of what can happen when a society disregards a coming disaster until too late. I hope that Winner-Take-All will prompt people to demand more of elected officials and to arrest the growing income gap for the sake of our democracy.

Michael Emmett Brady "mandmbrady" (Bellflower, California ,United States)

4.5 stars-Wall Street speculators control both parties, September 19, 2010 See all my reviews

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover)

This book basically argues that Wall Street controls both political parties through the use of massive campaign contributions and lobbyists who buy off both the Republicans and Democrats in the White House,Senate and House.This is essentially correct but obvious.Anyone can go back to the 1976 Jimmy Carter campaign and simply verify that the majority of his campaign funds and advisors came from Wall Street.This identical conclusion also holds with respect to Ronald Reagan,George H W Bush,Bill Clinton,George W Bush and Barack Obama. The only Presidents/Presidential candidates not dominated by Wall Street since 1976 were Gerald Ford, Walter Mondale, Ross Perot, Ralph Nader and Pat Buchanan.

For instance,it is common knowledge to anyone who carefully checks to see where the money is coming from that Wall Street financiers, hedgefunds, private equity firms and giant commercial banks are calling the shots. For example, one could simply read the July 9,2007 issue of FORTUNE magazine to discover who the major backers of John McCain, Hillary Clinton and Barack Obama were. One could also have read Business Week(2-25-2008) or the Los Angeles Times of 3-21-2008.Through February, 2008 the major donors to the McCain campaign were 1)Merrill Lynch, 2) Citigroup, 3)Goldman Sachs, 4)J P Morgan Chase and 5)Credit Suisse

The major donors to the Hillary Clinton campaign were 1)Goldman Sachs, 2)Morgan Stanley, 3)Citigroup, 4)Lehman Brothers and 5)J P Morgan Chase.

Guess who were the major donors to the Obama campaign ? If you guessed 1)Goldman Sachs,2)UBS Ag,3)J P Morgan Chase ,4)Lehman Brothers and 5)Citigroup, then you are correct.

It didn't matter who became President-Hillary Clinton,Barack Obama or John McCain.All three had been thoroughly vetted by Wall Street. The campaign staffs of all three candidates ,especially their economic and finance advisors, were all Wall Street connected. Wall Street would have been bailed out regardless of which party won the 2008 election.

Obama is not going to change anything substantially in the financial markets. Neither is Rep. Barney Frank, Sen. Chris Dodd, Sen. Kerry or Sen. Schumer, etc. Nor is any Republican candidate going to make any changes, simply because the Republican Party is dominated even more so by Wall Street(100%) than the Democratic Party(80%). The logical solution would be to support a Third Party candidate, for example, Ross Perot .

One aspect of the book is deficient. True conservatives like Ross Perot, Pat Buchanan and Lou Dobbs have been warning about the grave dangers of hallowing out and downsizing the American Manufacturing -Industrial sector, with the consequent offshoring and/or loss of many millions of American jobs, for about 20 years at the same time that the " financial services " sector has exploded from 3% of the total service sector in 1972 to just under 40% by 2007. This is what is causing the great shrinkage in the middle class in America .

Matt Milholland (California)

An Important Book, October 9, 2010 See all my reviews

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover)

This is a phenomenal book and everyone interested in how American politics works (or more accurately, doesn't work) should pick it up. It's both really smart and really accessible to a lay audience, which is rare for a political science book.

Extreme economic inequality and the near paralysis of our governing institutions has lead to a status-quo that is almost entirely indifferent to the needs of working families. Hacker & Pierson chronicle the rise of this corrupt system and the dual, yet distinct, roles the Republican and Democratic Parties have played in abetting it.

Seriously, it's top-notch. Read this book.

Loyd E. Eskildson "Pragmatist" By(Phoenix, AZ.)

4.0 out of 5 stars Interesting and Timely, but Also Off-Base in Some Regards, September 15, 2010 See all my reviews

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover) The thirty-eight biggest Wall Street companies earned $140 billion in 2009, a record that all taxpayers who contributed to their bailouts can be proud of. Among those, Goldman Sachs paid its employees an average $600,000, also a record, and at least partially attributable to our bailout of AIG, which promptly gave much of the money to Goldman. Prior to that, the top 25 hedge fund managers earned an average of $892 million in 2007. "Winner-Take-All Politics" is framed as a detective story about how we got to inequality levels where the top 300,000 (0.1%) receive over 20% of national income, vs. 13.5% for the bottom 180 million (60% of the population).

Between 1947 and 1973, real family median income essentially doubled, and the growth percentage was virtually the same for all income levels. In the mid-1970s, however, economic inequality began to increase sharply and middle-incomes lagged. Increased female workforce participation rates and more overtime helped cushion the stagnation or decline for many (they also increased the risk of layoffs/family), then growing credit card debt shielded many families from reality. Unfortunately, expectations of stable full-time employment also began shrinking, part-time, temporary, and economic risk-bearing (eg. taxi drivers leasing vehicles and paying the fuel costs; deliverymen 'buying' routes and trucks) work increased, workers covered by employer-sponsored health insurance fell from 69% in 1979 to 56% in 2004, and retirement coverage was either been dropped entirely or mostly converted to much less valuable fix-contribution plans for private sector employees. Some exceptions have occurred that benefit the middle and lower-income segments - Earned Income Tax Credit (EITC), Medicaid, and Medicare were initiated or expanded, but these have not blunted the overall trend. Conversely, welfare reform, incarceration rates rising 6X between 1970 and 2000, bankruptcy reform, and increased tax audits for EITC recipients have also added to their burden, Social Security is being challenged again (despite stock market declines, enormous transition costs, and vastly increased overhead costs and fraud opportunity), and 2009's universal health care reform will be aggressively challenged both in the courts and Washington.

Authors Hacker and Pierson contend that growing inequality is not the 'natural' product of market rewards, but mostly the artificial result of deliberate government policies, strongly influenced by industry lobbyists and donations, new and expanded conservative 'think tanks,' and inadequate media coverage that focused more on the 'horse race' aspects of various initiatives than their content and impact. First came the capital gains tax cuts under President Carter, then deregulation of the financial industry under Clinton, the Bush tax cuts of 2001 and 2003, and the financial bailouts in 2008-09. The authors contend that if the 1970 tax structure remained today, the top gains would be considerably less.

But what about the fact that in 1965 CEOs of large corporations only earned about 24X the average worker, compared to 300+X now? Hacker and Pierson largely ignore the role of board-room politics and malfeasance that have mostly allowed managers to serve themselves with payment without regard to performance and out of proportion to other nations. In 2006, the 20 highest-paid European managers made an average $12.5 million, only one-third as much as the 20 highest-earning U.S. executives. Yet, the Europeans led larger firms - $65.5 billion in sales vs. $46.5 billion for the U.S. Asian CEOs commonly make only 10X-15X what their base level employees make. Jiang Jianqing, Chairman of the Industrial and Commercial Bank of China (world's largest), made $234,700 in 2008, less than 2% of the $19.6 million awarded Jamie Dimon, CEO of the world's fourth-largest bank, JPMorgan Chase.

"Winner-Take-All Politics" also provides readers with the composition of 2004 taxpayers in the top 0.1% of earners (including capital gains). Non-finance executives comprised 41% of the group, finance professionals 18.4%, lawyers 6%, real estate personages 5%, physicians 4%, entrepreneurs 4%, and arts and sports stars 3%. The authors assert that this shows education and skills levels are not the great dividers most everyone credits them to be - the vast majority of Americans losing ground to the super-rich includes many well-educated individuals, while the super-rich includes many without a college education (Sheldon Adelson, Paul Allen, Edgar Bronfman, Jack Kent Cook, Michael Dell, Walt Disney, Larry Ellison, Bill Gates, Wayne Huizenga, Steve Jobs, Rush Limbaugh, Steve Wozniak, and Mark Zuckerberg).

Authors Hacker and Pierson are political science professors and it is understandable that they emphasize political causes (PACs, greater recruitment of evangelical voters, lobbying - eg. $500 million on health care lobbying in 2009, filibusters that allow senators representing just 10% of the population to stop legislation and make the other side look incompetent, etc.) for today's income inequality. However, their claim that foreign trade is "largely innocent" as a cause is neither substantiated nor logical. Foreign trade as practiced today pads corporate profits and executive bonuses while destroying/threatening millions of American jobs and lowering/holding down the incomes of those affected. Worse yet, the authors don't even mention the impact of millions of illegal aliens depressing wage rates while taking jobs from Americans, nor do they address the canard that tax cuts for and spending by the super-wealthy are essential to our economic success (refuted by Moody's Analytics and Austan Goolsbee, Business Week - 9/13/2010). They're also annoyingly biased towards unions, ignoring their constant strikes and abuses in the 1960s and 1970s, major contributions to G.M., Chrysler, and legacy airline bankruptcies, and current school district, local, and state financial difficulties.

Bottom-Line: It is a sad commentary on the American political system that growing and record levels of inequality are being met by populist backlash against income redistribution and expanding trust in government, currently evidenced by those supporting extending tax cuts for the rich and railing against reforming health care to reduce expenditures from 17.3+% of GDP to more internationally competitive levels (4-6%) while improving patient outcomes. "Winner-Take-All Politics" is interesting reading, provides some essential data, and point out some evidence of the inadequacy of many voters. However, the authors miss the 'elephant in the room' - American-style democracy is not viable when at most 10% of citizens are 'proficient' per functional literacy tests ([...]), and only a small proportion of them have the time and access required to sift through the flood of half-truths, lies, and irrelevancies to objectively evaluate 2,000+ page bills and other political activity. (Ideology-dominated economic professionals and short-term thinking human rights advocates are two others.) Comments (2)

Brian Kodi

"Americans live in Russia, but they think they live in Sweden." - Chrystia Freeland, March 26, 2011 See all my reviews

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover)

No one should doubt the rising income inequality in America, which the authors trace back to the late 1970s since the latter part of Carter's presidency in what they call the "30 Year War". Zachary Roth, in a March 4th Time magazine article stated "A slew of conservative economists of unimpeachable academic credentials--including Martin Feldstein of Harvard, Glenn Hubbard, who was President Bush's top economic adviser, and Federal Reserve chair Ben Bernanke--have all acknowledged that inequality is on the rise."

And why should we care that most of the after tax income growth since 30 years ago has gone the way of the richest Americans in a "winner-take-all" economy? Because as Supreme Court justice biographer Melvin Urofsky stated, "in a democratic society the existence of large centers of private power is dangerous to the continuing vitality of a free people." (p. 81) Because if unchecked, a new economic aristocracy may replace the old hereditary aristocracy America's Founders fought to defeat (p. 298). Because unequal societies are unhappy societies, and inequality can foster individual resentment that may lead to a pervasive decline in civility and erosion of culture.

And why should we be concerned that this trend in rising inequality may not experience the period of renewal the authors are optimistic about? Because unlike the shock of the 1930s' Great Depression that served as the impetus for the politics of middle class democracy, the potential shockwaves of the 2008 Great Recession were tempered by massive government stimulus, resulting in no meaningful financial reform, and an extension of the tax cuts for the wealthy. And because of the lottery mentality of a large swath of the population which opposes tax increases on the rich. One day, they or their children too can share in the American dream. According to an October 2000 Time-CNN poll, 19 percent of Americans were convinced they belonged to the richest 1 percent. Another 20 percent thought they'd make the rank of the top 1 percent at some point in their lives. That's quite a turnover in the top 1 percent category to accommodate 20 percent of the population passing through.

Mr. Hacker and Mr. Pierson have put together powerful arguments on the root causes of income inequality in the U.S., its political and economic ramifications, and to a lesser extent, a roadmap to returning democracy to the masses. This is an eye opening and disturbing, yet informative book, even for readers who may disagree with their opinions.

J. Strauss (NYC)

3.0 out of 5 stars great history of big money influence on policy but needs more analysis of the ways policy affects the winner-take-all economy, September 21, 2011 See all my reviews

Amazon Verified Purchase(What's this?)

This review is from: Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class (Hardcover)

Writing:

A bit hokey and repetitive for the first couple chapters. Much better after that. Stick with it if you're interested in the subject.

Content:

This book does a very good job explaining how and why certain special interest groups (notably those that represent the wealthiest .1%) have come to have such a stranglehold on government, particularly Congress. I come away with a clear understanding of how the wealthiest citizens are able to exert their influence over legislative policy and enforcement at the federal level.

What I would have liked more of are better explanations of the mechanisms through which government policies exacerbate the winner-take-all economy. Tax policy (rates and loopholes) is the most obvious answer, and the book provides plenty of stats on the regression of tax policy over the past 30 years.

But complicated, interesting, and largely missing from public discourse is why PRE-TAX incomes have become so much more radically skewed during that time. This is certainly touched on - the authors are deliberate in saying it's not JUST tax policy that's contributing to increased inequality - but I would've liked much more analysis of the other policy-driven factors. "Deregulation" is too general an explanation to paint a clear picture.

The authors make it clear that they believe the increasing divide in pre-tax incomes (the winner-take-all economy) is not the inevitable result of technological changes and of differences in education ("the usual suspects"), but of policy decisions made at the state and, especially, federal levels. Personally, I wasn't fully convinced that technological change has little or nothing to do with the skew (though I agree that while education goes a long way toward explaining the gap between poor and middle class, it doesn't explain much of the gap between middle class and super rich). But I do believe, as they do, that public policy plays a large role in influencing the extent of inequality in pre-tax incomes, even beyond more obvious market-impacting factors like union influence, and mandates including the minimum wage, restrictions on pollution, workplace safety and fairness laws, etc.

Off the top of my head, here are some regulatory issues that affect market outcomes and can influence the extent of winner-take-all effects in the marketplace (a few of these may have been mentioned in the book, but none were discussed in detail):

And many more. I know regulatory issues like that play huge roles in the distribution of pre-tax "market" incomes, but I'd like to have a better understanding of how, and also to be better able to articulate how in response to those who seem to believe taxes (and perhaps obvious restrictions, such as on pollution or the minimum wage) are the only significant means through which governments influence wealth disparities.

There wasn't a whole lot of discussion of these or similar regulatory issues in the book. I would like to see another edition, or perhaps another book entirely, that does. Please let me know if you have any recommendations.


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[Jul 14, 2018] McMaken The Military Is A Jobs Program... For Immigrants Many Others

Jul 14, 2018 | www.zerohedge.com

by Tyler Durden Fri, 07/13/2018 - 18:45 12 SHARES Authored Ryan McMaken via The Mises Institute,

On the matter of immigration, even many commentators who support ease of migration also oppose the extension of government benefits to immigrants.

The idea, of course, is that free movement of labor is fine, but taxpayers shouldn't have to subsidize it. As a matter of policy, many also find it prudent that immigrants ought to be economically self sufficient before being offered citizenship. Switzerland, for instance, makes it harder to pursue citizenship while receiving social benefits.

This discussion often centers around officially recognized "welfare" and social-benefits programs such as TANF and Medicaid. But it is also recognized that taxpayer-funded benefits exist in the form of public schooling, free clinics, and other in-kind benefits.

But there is another taxpayer-supporter program that subsidizes immigration as well: the US military.

Government Employment for Immigrants

Last week, the AP began reporting that " the US Army is quietly discharging Immigrant recruits ."

Translation: the US government has begun laying off immigrants from taxpayer-funded government jobs.

It's unclear how many of these jobs have been employed, but according to the Department of Homeland security, "[s]ince Oct. 1, 2002, USCIS has naturalized 102,266 members of the military ."

The Military as a Jobs Program

Immigrants, of course, aren't the only people who benefit from government jobs funded through military programs.

The military has long served as a jobs programs helpful in mopping up excess labor and padding employment numbers. As Robert Reich noted in 2011 , as the US was still coming out of the 2009 recession:

And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. -- because all three have high concentrations of military and federal jobs.

He's right. While the private sector must cut back and re-arrange labor and capital to deal with the new economic realities post-recession, government jobs rarely go away.

Because of this, Reich concludes "America's biggest -- and only major -- jobs program is the U.S. military."

Reich doesn't think this is a bad thing. He only highlights the military's role as a de facto jobs program in order to call for more de jure jobs programs supported by federal funding.

Given the political popularity of the military, however, it's always easy to protect funding for the military jobs programs than for any other potential jobs programs. All the Pentagon has to do is assure Congress that every single military job is absolutely essential, and Congress will force taxpayers to cough up the funding.

Back during the debate over sequestration, for example, the Pentagon routinely warned Congress that any cutbacks in military funding would lead to major jobs losses, bringing devastation to the economy.

In other words, even the Pentagon treats the military like a jobs program when it's politically useful.

Benefits for enlisted people go well beyond what can be seen in the raw numbers of total employed. As Kelley Vlahos points out at The American Conservative , military personnel receive extra hazard pay "even though they are far from any fighting or real danger." And then there is the "Combat Zone Tax Exclusion (CZTE) program which exempts enlisted and officers from paying federal taxes in these 45 designated countries. Again, they get the tax break -- which accounted for about $3.6 billion in tax savings for personnel in 2009 (the combat pay cost taxpayers $790 million in 2009)– whether they are really in danger or not."

There's also evidence that military personnel receive higher pay in the military than do their private-sector counterparts with similar levels of education and training.

Nor do the benefits of military spending go only to enlisted people. The Pentagon has long pointed to its spending on civilian jobs in many communities, including manufacturing jobs and white-collar technical jobs.

This, of course, has long been politically useful for the Pentagon as well, since as political scientist Rebecca Thorpe has shown in her book The American Warfare State , communities that rely heavily on Pentagon-funded employment are sure to send Congressmen to Washington who will make sure the taxpayer dollars keep flowing to Pentagon programs.

Whether you're talking to Robert Reich or some Pentagon lobbyist on Capitol Hill, the conclusion is clear: the military is both a jobs program and a stimulus program. Cut military spending at your peril!

Military Spending Destroys Private Sector Jobs

The rub, however, is that military spending doesn't actually improve the economy. And much the money spent on military employment would be best spent on the private, voluntary economy.

This has long been recognized by political scientist Seymour Melman who has discussed the need for "economic conversion," or converting military spending into other forms of spending. Melman observes :

Since we know that matter and energy located in Place A cannot be simultaneously located in Place B, we must understand that the resources used up on military account thereby represent a preemption of resources from civilian needs of every conceivable kind.

Here, Melman is simply describing in his own way what Murray Rothbard explained in Man, Economy, and State . Namely, government spending distorts the economy as badly as taxation -- driving up prices for the private sector, and withdrawing resources from private sector use.

Ellen Brown further explains :

The military actually destroys jobs in the civilian economy. The higher profits from cost-plus military manufacturing cause manufacturers to abandon more competitive civilian endeavors; and the permanent war economy takes engineers, capital and resources away from civilian production.

But, as a classic case of "the seen" vs. "the unseen," it's easy to point to jobs created by military spending. How many jobs were lost as a result of that same spending? That remains unseen, and thus politically irrelevant.

Military fan boys will of course assure us that every single military job and every single dollar spent on the military is absolutely essential. It's all the service of "fighting for freedom." For instance, Mitchell Blatt writes , in the context of immigrant recruits, "I'm not worried about the country or origin of those who are fighting to defend us. What matters is that our military is as strong as it can be." The idea at work here is that the US military is a lean machine, doing only what is necessary to get the job done, and as cost effectively as possible. Thus, hiring the "best" labor, from whatever source is absolutely essential.

This, however, rather strains the bounds of credibility. The US military is more expensive than the next eight largest militaries combined . The US's navy is ten times larger than the next largest navy. The US's air force is the largest in the world, and the second largest air force belongs, not to a foreign country, but to the US Navy.

Yet, we're supposed to believe that any cuts will imperil the "readiness" of the US military.

Cut Spending for Citizens and Non-Citizens Alike

My intent here is not to pick on immigrants specifically. The case of military layoffs for immigrants simply helps to illustrate a couple of important points: government jobs with the military constitute of form of taxpayer-funded subsidy for immigrants. And secondly, the US military acts as a job program, not just for immigrants but for many native-born Americans.

In truth, layoffs in the military sector ought to be far more widespread, and hardly limited to immigrants. The Trump Administration is wrong when it suggests that the positions now held by immigrant recruits ought to be filled by American-born recruits. Those positions should be left unfilled. Permanently.


cougar_w Fri, 07/13/2018 - 18:53 Permalink

No you retarded fuck, the military is a taxpayer-funed merc army supporting the overseas hegemonic goals of American-style Corporatism . That the military is full of the sons and daughters of poor people is only because rich whites won't send their trustfund babies to kill brown people for oil.

Smedley Butler, 1935: " War is a Racket "

How anyone still gets this wrong is symptomatic of too much inbreeding.

Expendable Container -> cougar_w Fri, 07/13/2018 - 18:58 Permalink

The military is a taxpayer-funded merc army supporting Isra hell's goals none of which benefit the US.

cougar_w -> Expendable Container Fri, 07/13/2018 - 19:12 Permalink

No, asshole. It's about money. About cash and gold. Profit. Markets. Growth. About cheap or free resources. Access to labor. New customers.

War makes companies rich, it might be the ONLY way they can get rich. War is waged when GM wants to sell trucks to the Pentagon. When Boeing wants to sell jets. When MIT wants money for arms research. When NATO wants a reason to exist. The dogs of war are loosed when oil gets tight. When countries won't "accept our cultural freedoms". When trade agreements aren't enough to open up new markets.

Isreal has fleeting nothing to do with it, except maybe when war aligns with their perceived need for hegemony in their own sphere. But by loading all this on Isreal you encourage others to miss the real fox in the henhouse. You could wipe Isreal off the Earth tomorrow and still have wars for profit for a thousand years to come.

This nation was born in war. It has practiced war since that day and will be at war with the rest of the world until humans are killed to the last and the last ounce of profit from war is had.

TeethVillage88s -> cougar_w Fri, 07/13/2018 - 19:08 Permalink

or from systematic corruption of all US Institutions and the politicization of all US Institutions... you need a job, you want to work here, you say this, and you do this, ... tow the line, no politics, no whistleblowing,... and we won't blackball your ass from the industry... got it... u got debts, keep ur nose clean!

Idiocracy's Not Sure Fri, 07/13/2018 - 18:56 Permalink

the US military has slacking pay.

Quantify -> Idiocracy's Not Sure Fri, 07/13/2018 - 18:58 Permalink

Yes the pay sucks but you get more done before 8am than most people do in a week. But seriously its a pretty good gig in the long run. Medical care a decent retirement system, travel a chance to meet and integrate with different cultures and kill them...its pretty cool.

AudiDoug Fri, 07/13/2018 - 19:17 Permalink

Excluding a small percentage, the military is much like the DMV. We have a cartoon vision of all enlisted being GI Joe, ready to grab a gun and fight evil. This in not the case at all. Most positions are very simple, repetitive bureaucratic positions. Really is a giant Jobs program to keep people busy.

Debt Slave Fri, 07/13/2018 - 19:22 Permalink

"The idea at work here is that the US military is a lean machine, doing only what is necessary to get the job done, and as cost effectively as possible."

Then why are we still in Afghanistan?

No need to answer, the question is rhetorical.

DingleBarryObummer Fri, 07/13/2018 - 18:59 Permalink

Support our B̶a̶n̶k̶s̶t̶e̶r̶s̶ Troops!

[Jul 09, 2018] July 4th and What It Really Means for Us by Boyd D. Cathey

Later "eqality of means" was replaced by "equality of opportunity". Still huge discrepancy in wealth typical for neoliberalism is socially destructive. And election of Trump was partially a reaction on neoliberalism dominance for the last 40 ears.
"... The Founders rejected egalitarianism. They understood that no one is, literally, "created equal" to anyone else. Certainly, each and every person is created with no less or no more dignity, measured by his or her own unique potential before God. But this is not what most contemporary writers mean today when they talk of "equality." ..."
"... by our own maximum possibilities and potential ..."
Notable quotes:
"... The Founders rejected egalitarianism. They understood that no one is, literally, "created equal" to anyone else. Certainly, each and every person is created with no less or no more dignity, measured by his or her own unique potential before God. But this is not what most contemporary writers mean today when they talk of "equality." ..."
"... by our own maximum possibilities and potential ..."
Jul 06, 2018 | www.unz.com

... ... ...

For many Americans the Declaration of Independence is a fundamental text that tells the world who we are as a people. It is a distillation of American belief and purpose. Pundits and commentators, left and right, never cease reminding us that America is a new nation, "conceived in liberty and dedicated to the proposition that all men are created equal."

Almost as important as a symbol of American belief is Abraham Lincoln's Gettysburg Address. It is not incorrect to see a link between these two documents, as Lincoln intentionally placed his short peroration in the context of a particular reading of the Declaration.

Lincoln bases his concept of the creation of the American nation in philosophical principles he sees enunciated in 1776, and in particular on an emphasis on the idea of "equality." The problem is that this interpretation, which forms the philosophical base of both the dominant "movement conservatism" today -- neoconservatism -- and the neo-Marxist multicultural Left, is basically false.

... ... ...

Although those authors employed the phrase "all men are created equal," and certainly that is why Lincoln made direct reference to it, a careful analysis of the Declaration does not confirm the sense that Lincoln invests in those few words. Contextually, the authors at Philadelphia were asserting their historic -- and equal -- rights as Englishmen before the Crown, which had, they believed, been violated and usurped by the British government, and it was to parliament that the Declaration was primarily directed.

The Founders rejected egalitarianism. They understood that no one is, literally, "created equal" to anyone else. Certainly, each and every person is created with no less or no more dignity, measured by his or her own unique potential before God. But this is not what most contemporary writers mean today when they talk of "equality."

Rather, from a traditionally-Christian viewpoint, each of us is born into this world with different levels of intelligence, in different areas of expertise; physically, some are stronger or heavier, others are slight and smaller; some learn foreign languages and write beautiful prose; others become fantastic athletes or scientists. Social customs and traditions, property holding, and individual initiative -- each of these factors further discriminate as we continue in life.

None of this means that we are any less or more valued in the judgment of God, Who judges us based on our own, very unique capabilities. God measures us by ourselves, by our own maximum possibilities and potential , not by those of anyone else -- that is, whether we use our own, individual talents to the very fullest (recall the Parable of the Talents in the Gospel of St. Matthew).

... ... ...


Echoes of History , July 6, 2018 at 5:52 am GMT

"All men are created equal" is a simply a rhetorical argument against the "divine right of kings" used to revive an ancient, fascist, Roman-style Republic style government, where men of equal political stature are bound together as a band of brothers into a "fasces" to form a militia, necessary to a free state like Rome once had in its beginning. No king, no standing army.

Which is why there are fascist symbols throughout the US government, including in the US Senate. Watch CSPAN if you don't believe me. See those fasces?

And do study what the Founders said more. Like the author of the term "all men are created equal." He wrote in the same document:

" the merciless Indian Savages " -- Declaration of Independence

Does that sound like he thought whites and Indians were equal? Nope.

He also wrote:

"Nor is it less certain that the two races, equally free, cannot live in the same government. Nature, habit, opinion has drawn indelible lines of distinction between them." (Thomas Jefferson, Autobiography)

Does that sound like he thought blacks and whites were equal? Nope.

So stop spouting false Leftist propaganda about what the term "all men are created equal" means. All it does is make you sound extremely uninformed.

Echoes of History , July 6, 2018 at 6:14 am GMT
@Dr. Doom

Yes, there is still an America, living and breathing, somewhat piled-on by Fake Americans at the moment. Don't give up on the Comeback Kid . You do not want to be as bitter and wrong as the defeatist Never Trumper" Cuckservatives. The Fake Americans will have to go back. Just like the Fake Europeans are already going back. Viktor Orban called Italy's decision to turn away rescue ship a "great moment." And the pendulum is just beginning to swing. The trend is your friend. Why don't you jump on the team and come on in for the big win?

Wizard of Oz , July 6, 2018 at 8:16 am GMT
@Dan Hayes

Thank you for mentioning Jaffa. I had to look him up. Only Wikipedia so far but I found something of interest that you might like to comment on. Mention is made of Lincoln rejecting the Douglas arguments for states's rights on the ground that (majoritarian) democracy should not be allowed to enslave anyone. Is it possible to say that America's original sin of slavery ensured that there was an insoluble problem left behind by the original constitution makers plus the extension of the franchise to all adult white males?

Anon [294] Disclaimer , July 6, 2018 at 11:44 am GMT
"..a careful analysis of the Declaration does not confirm the sense that Lincoln invests in those few words. Contextually, the authors at Philadelphia were asserting their historic -- and equal -- rights as Englishmen before the Crown, which had, they believed, been violated and usurped by the British government,.."

Thank you Mr Cathey. As a non American, I was always puzzled by the obvious falsehood of the statement "all men created equal" -- particularly in a nation that still legalized slavery -- and how it could still be repeated ad nauseaum. Interesting, how one victorious man and one victorious teaching can have such profound consequences for the way people live and think generations later.

'All men are created equal' is almost the opposite of that other common mistake, 'no pity for the weak'. Yet both lead to oppressive regimes. A true anthropology will lead to different healthy political systems. A twisted one, always to repressive institutions.

Crawfurdmuir , Next New Comment July 6, 2018 at 4:52 pm GMT

@Echoes of History

"All men are created equal" is a simply a rhetorical argument against the "divine right of kings" used to revive an ancient, fascist, Roman-style Republic style government, where men of equal political stature are bound together as a band of brothers into a "fasces" to form a militia, necessary to a free state like Rome once had in its beginning. No king, no standing army.

My take is a little different, but not incompatible with yours.

The Declaration's assertion is "that all men are created equal, that they are endowed by their Creator with certain unalienable Rights "

So, to begin with, this is not a claim that all men are created equal in ability or character. The Founders recognized that they were not, and that ordinary social and economic inequalities, due to innate differences in ability or character, were natural, normal, and inevitable. The Declaration is first and foremost a legal document. It claims equality of rights – a legal claim, not a sociological, anthropological, or psychological one. Moreover, the rights are unalienable – that is, they cannot be alienated – sold, bartered, or given away – because someone entitled to them shall have moved from old England to the New World.

The grievance of the colonists was that taxes – the stamp tax, the tea tax, etc. – had been imposed upon them by the parliament at Westminster, an assembly in which they were not represented. Hence the slogan, "no taxation without representation." It was a principle based in the main non-religious issue of the English civil war (1642-1649). Charles I had attempted to levy "ship money" by royal prerogative, without the consent of Parliament. Unlike previous levies, which had been confined to coastal towns and were raised only in time of war, he did so in peacetime and extended the tax to inland areas. This provoked strong resistance; some local officials refused assistance to collection of the tax. The Petition of Right, written by Sir Edward Coke, complained:

Your subjects have inherited this freedom, that they should not be compelled to contribute to any tax, tallage, aid, or other like charge not set by common consent, in parliament.

Extra-parliamentary taxation was effectively ended by the Long Parliament of 1640. After the "Glorious Revolution" of 1689, it was formally prohibited by the English Bill of Rights.

All of this history was much more familiar to the Founders in 1776 than it is to Americans today. The point of the claim that "all men are created equal" was simply to argue that Englishmen, under English law, were equally entitled to representation in any assembly that levied taxes on them, whether they were resident in England or in its colonies.

The argument for levying taxes on the colonies was that they were needed to pay for the defense of the colonies during what we call the French and Indian War, which was in fact just the North American theatre of what in Europe is known as the Seven Years' War. That they may have been needed for this purpose was not in dispute. Englishmen in England were taxed to pay for the Seven Years' War, but they were represented in the Parliament that levied the tax. Americans were not. From their point of view the taxes levied on them were as objectionable as ship money had been to the people of England in the time of Charles I.

The Declaration is therefore a sort of American version of the Petition of Right. Jefferson was an admirer of Coke and undoubtedly saw the parallel. His high-flown language about equality was meant to make the case against George III on behalf of English subjects in North America in the same way that Coke's Petition of Right made the case against Charles I on behalf of English subjects in England. The colonists' objection was that English subjects, wheresoever domiciled within English jurisdiction, should have equal rights under English law.

Jefferson never intended to proclaim the equality of negro slaves or "Indian savages" with free whites. Jefferson's observations in his Notes on the State of Virginia make quite clear that he did not believe them to be equals with whites in ability or character. The Indians he regards as primitives, having some admirable and some frightful qualities, but above all, as formidable enemies. He despairs of the intelligence of blacks; he faults black slavery because it brings out lamentable tendencies of laziness and petty tyranny among whites. These remarks are striking for their candor and have the ring of truth even today.

Russ , Next New Comment July 6, 2018 at 5:08 pm GMT
I appreciate Mr. Cathey's work here. On Tuesday the 3rd, one of the many overemployed sycophants in the executive ranks of the corporation which employs me deemed it necessary to bulk-email all of us peons with the message of how vital diversity and inclusion are to proper celebration of the 4th. Right -- because reserving mid-January through February for the blacks, March for women or Hispanics (I forget which), and June for the tutti-fruttis isn't nearly enough

[Jun 28, 2018] How America's Wars Fund Inequality at Home by Stephanie Savell

Notable quotes:
"... The implications for today are almost painfully straightforward: the current combination of deficit spending and tax cuts spells disaster for any hopes of shrinking America's striking inequality gap . Instead, credit-card war spending is already fueling the dramatic levels of wealth inequality that have led some observers to suggest that we are living in a new Gilded Age , reminiscent of the enormous divide between the opulent lifestyles of the elite and the grinding poverty of the majority of Americans in the late nineteenth century. ..."
"... Today's wars are paid for almost entirely through loans -- 60% from wealthy individuals and governmental agencies like the Federal Reserve, 40% from foreign lenders. Meanwhile, in October 2001, when Washington launched the war on terror, the government also initiated a set of tax cuts, a trend that has only continued. The war-financing strategies that President George W. Bush began have flowed on without significant alteration under Presidents Obama and Trump. (Obama did raise a few taxes, but didn't fundamentally alter the swing towards tax cuts.) President Trump's extreme tax "reform" package, which passed Congress in December 2017 -- a gift-wrapped dream for the 1% -- only enlarged those cuts. ..."
"... However little the public may realize it, Americans are already feeling the costs of their post-9/11 wars. Those have, after all, massively increased the Pentagon's base budget and the moneys that go into the expanding national security budget , while reducing the amount of money left over for so much else from infrastructure investment to science. In the decade following September 11, 2001, military spending increased by 50% , while spending on every other government program increased only 13.5%. ..."
Jun 28, 2018 | www.tomdispatch.com

Credit-Card Wars
Today's War-Financing Strategies Will Only Increase Inequality
By Stephanie Savell

In the name of the fight against terrorism, the United States is currently waging " credit-card wars " in Afghanistan, Iraq, Syria, and elsewhere. Never before has this country relied so heavily on deficit spending to pay for its conflicts. The consequences are expected to be ruinous for the long-term fiscal health of the U.S., but they go far beyond the economic. Massive levels of war-related debt will have lasting repercussions of all sorts. One potentially devastating effect, a new study finds, will be more societal inequality.

In other words, the staggering costs of the longest war in American history -- almost 17 years running, since the invasion of Afghanistan in October 2001 -- are being deferred to the future. In the process, the government is contributing to this country's skyrocketing income inequality.

Since 9/11, the U.S. has spent $5.6 trillion on its war on terror, according to the Costs of War Project, which I co-direct, at Brown University's Watson Institute for International and Public Affairs . This is a far higher number than the Pentagon's $1.5 trillion estimate, which only counts expenses for what are known as "overseas contingency operations," or OCO -- that is, a pot of supplemental money, outside the regular annual budget, dedicated to funding wartime operations. The $5.6 trillion figure, on the other hand, includes not just what the U.S. has spent on overseas military operations in Iraq, Afghanistan, Pakistan, and Syria, but also portions of Homeland Security spending related to counterterrorism on American soil, and future obligations to care for wounded or traumatized post-9/11 military veterans. The financial burden of the post-9/11 wars across the Greater Middle East -- and still spreading , through Africa and other regions -- is far larger than most Americans recognize.

During prior wars, the U.S. adjusted its budget accordingly by, among other options, raising taxes to pay for its conflicts. Not so since 2001, when President George W. Bush launched the "Global War on Terror." Instead, the country has accumulated a staggering amount of debt. Even if Washington stopped spending on its wars tomorrow, it will still, thanks to those conflicts, owe more than $8 trillion in interest alone by the 2050s.

Putting the Gilded Age to Shame

It's hard to fathom what that enormous level of debt will do to our economy and society. A new Costs of War study by political scientist and historian Rosella Capella Zielinski offers initial clues about its impact here. She takes a look at how the U.S. has paid for its conflicts from the War of 1812 through the two World Wars and Vietnam to the present war on terror. While a range of taxes, bond sales, and other mechanisms were used to raise funds to fight such conflicts, no financial strategy has relied so exclusively on borrowing -- until this century. Her study also explores how each type of war financing has affected inequality levels in this country in the aftermath of those conflicts.

The implications for today are almost painfully straightforward: the current combination of deficit spending and tax cuts spells disaster for any hopes of shrinking America's striking inequality gap . Instead, credit-card war spending is already fueling the dramatic levels of wealth inequality that have led some observers to suggest that we are living in a new Gilded Age , reminiscent of the enormous divide between the opulent lifestyles of the elite and the grinding poverty of the majority of Americans in the late nineteenth century.

Capella Zielinski carefully breaks down what effects the methods used to pay for various wars have had on subsequent levels of social inequality. During the Civil War, for example, the government relied primarily on loans from private donors. After that war was over, the American people had to pay those loans back with interest, which proved a bonanza for financial elites, primarily in the North. Those wealthy lenders became wealthier still and everyone else, whose taxes reimbursed them, poorer.

In contrast, during World War I, the government launched a war-bond campaign that targeted low-income people. War savings stamps were offered for as little as 25 cents and war savings certificates in denominations starting at $25. Anyone who could make a small down payment could buy a war bond for $50 and cover the rest of what was owed in installments. In this way, the war effort promoted savings and, in its wake, a striking number of low-income Americans were repaid with interest, decreasing the inequality levels of that era.

Taxation strategies have varied quite significantly in various war periods as well. During World War II, for instance, the government raised tax rates five times between 1940 and 1944, levying progressively steeper ones on higher income brackets (up to 65% on incomes over $1 million). As a result, though government debt was substantial in the aftermath of a global struggle fought on many fronts, the impact on low-income Americans could have been far worse. In contrast, the Vietnam War era began with a tax cut and, in the aftermath of that disastrous conflict, the U.S. had to deal with unprecedented levels of inflation. Low-income households bore the brunt of those higher costs, leading to greater inequality.

Today's wars are paid for almost entirely through loans -- 60% from wealthy individuals and governmental agencies like the Federal Reserve, 40% from foreign lenders. Meanwhile, in October 2001, when Washington launched the war on terror, the government also initiated a set of tax cuts, a trend that has only continued. The war-financing strategies that President George W. Bush began have flowed on without significant alteration under Presidents Obama and Trump. (Obama did raise a few taxes, but didn't fundamentally alter the swing towards tax cuts.) President Trump's extreme tax "reform" package, which passed Congress in December 2017 -- a gift-wrapped dream for the 1% -- only enlarged those cuts.

In other words, in this century, Washington has combined the domestic borrowing patterns of the Civil War with the tax cuts of the Vietnam era. That means one predictable thing: a rise in inequality in a country in which the income inequality gap is already heading for record territory.

Just to add to the future burden of it all, this is the first time government wartime borrowing has relied so heavily on foreign debt. Though there is no way of knowing how this will affect inequality here in the long run, one thing is already obvious: it will transfer wealth outside the country.

Economist Linda Bilmes has argued that there's another new factor involved in Washington's budgeting of today's wars. In every other major American conflict, after an initial period, war expenditures were incorporated into the regular defense budget. Since 2001, however, the war on terror has been funded mainly by supplemental appropriations (those Overseas Contingency Operations funds), subject to very little oversight. Think of the OCO as a slush fund that insures one thing: the true impact of this era's war funding won't hit until far later since such appropriations are exempt from spending caps and don't have to be offset elsewhere in the budget.

According to Bilmes, "This process is less transparent, less accountable, and has rendered the cost of the wars far less visible." As a measure of the invisible impact of war funding in Washington and elsewhere, she calculates that, while the Senate Appropriations Subcommittee on Defense discussed war financing in 79% of its hearings during the Vietnam era, since 9/11, there have been similar mentions at only 17% of such hearings. For its part, the Senate Finance Committee has discussed war-funding strategy in a thoroughgoing way only once in almost 17 years.

Hidden Tradeoffs and Deferred Costs

The effect of this century's unprecedented budgetary measures is that, for the most part, the American people don't feel the financial weight of the wars their government is waging -- or rather, they feel it, but don't recognize it for what it is. This corresponds remarkably well with the wars themselves, fought by a non-draft military in distant lands and largely ignored in this country (at least since the vast public demonstrations against the coming invasion of Iraq ended in the spring of 2003). The blowback from those wars, the way they are coming home, has also been ignored, financially and otherwise.

However little the public may realize it, Americans are already feeling the costs of their post-9/11 wars. Those have, after all, massively increased the Pentagon's base budget and the moneys that go into the expanding national security budget , while reducing the amount of money left over for so much else from infrastructure investment to science. In the decade following September 11, 2001, military spending increased by 50% , while spending on every other government program increased only 13.5%.

How exactly does this trade-off work? The National Priorities Project explains it well. Every year the federal government negotiates levels of discretionary spending (as distinct from mandatory spending, which largely consists of Social Security and Medicare). In 2001, there were fewer discretionary funds allocated to defense than to non-defense programs, but the ensuing war on terror dramatically inflated military spending relative to other parts of the budget. In 2017, military and national security spending accounted for 53% of discretionary spending. The 2018 congressionally approved omnibus spending package allocates $700 billion for the military and $591 billion for non-military purposes, leaving that proportion about the same. (Keep in mind, that those totals don't even include all the money flowing into that Overseas Contingency Operations fund). President Trump's proposals for future spending, if accepted by Congress, would ensure that, by 2023, the proportion of military spending would soar to 65% .

In other words, the rise in war-related military expenditures entails losses for other areas of federal funding. Pick your issue: crumbling bridges, racial justice, housing, healthcare, education, climate change -- and it's all being affected by how much this country spends on war.

Nonetheless, thanks to its credit-card version of war financing, the government has effectively deferred most of the financial costs of its unending conflicts to the future. This, in turn, contributes to how detached most Americans tend to feel from the very fact that their country is now eternally at war. Political scientist and policy analyst Sarah Kreps argues that Americans become invested in how a war is being conducted only when they're asked to pay for it. In her examination of the history of the financing of American wars, she writes , "The visibility and intrusiveness of taxes are exactly what make individuals scrutinize the service for which the resources are being used." If there were war taxes today, their unpopularity would undoubtedly lead Americans to question the costs and consequences of their country's wars in ways now missing from today's public conversation.

Pressing for a real war budget, though, is not only a mechanism to alert Americans to the effects (on them) of the wars their government is fighting. It is also a potential lever through which citizens could affect the country's foreign policy and pressure elected officials to bring those wars to an end. Some civic groups and activists from across the political spectrum have indeed been pushing to reduce the Pentagon budget, bloated by war, corruption , and fear-mongering . They are, however, up against both the power of an ascendant military-industrial complex and wars that have been organized, in their funding and in so many other ways, not to be noticed.

Those who care about this country's economic future would be remiss not to include today's war financing strategy among the country's most urgent fiscal challenges. Anyone interested in improving American democracy and the well-being of its people should begin by connecting the budgetary dots. The more money this country spends on military activities, the more public coffers will be depleted by war-related interest payments and the less public funding there will be for anything else. In short, it's time for Americans worried about living in a country whose inequality gap could soon surpass that of the Gilded Age to begin paying real attention to our " credit-card wars ."

Stephanie Savell, a TomDispatch regular , is co-director of the Costs of War Project at Brown University's Watson Institute for International and Public Affairs . An anthropologist, she conducts research on security and civic engagement in Brazil and in the U.S. She co-authored The Civic Imagination: Making a Difference in American Political Life .

Follow TomDispatch on Twitter and join us on Facebook . Check out the newest Dispatch Books, Beverly Gologorsky's novel Every Body Has a Story and Tom Engelhardt's A Nation Unmade by War , as well as Alfred McCoy's In the Shadows of the American Century: The Rise and Decline of U.S. Global Power , John Dower's The Violent American Century: War and Terror Since World War II , and John Feffer's dystopian novel Splinterlands .

Copyright 2018 Stephanie Savell

[Jun 28, 2018] At War With Ourselves The Domestic Consequences of Foreign Policies

Notable quotes:
"... Special to Consortium News ..."
"... In 2015, suicides accounted for over 60 percent of gun deaths in the U.S., while homicides made up around 36 percent of that year's total. Guns are consistently the most common method by which people take their own lives. ..."
"... When veterans return home from chaotic war zones, resuming normal civilian life can present major difficulties. The stresses of wartime create a long-term, sustained "fight-or-flight" response, not only producing physical symptoms such as sweating, shaking or a racing heart rate, but inflicting a mental and moral toll as well. ..."
"... "Over the course of the year I was there, the units I was embedded with lost three men, and all of them were lost to suicide, not to enemy action," Van Buren said. "This left an extraordinary impression on me, and triggered in me some of the things that I write about." ..."
"... If you enjoyed this original article please consider making a donation to Consortium News so we can bring you more stories like this one. ..."
Jun 28, 2018 | consortiumnews.com

At War With Ourselves: The Domestic Consequences of Foreign Policies June 25, 2018 • 72 Comments

There is a direct connection between gun violence and suicide rates in the United States and America's aggressive foreign policy, argues Will Porter.

How America's Gun Violence Epidemic May Have Roots in Overseas War Zones

By Will Porter
Special to Consortium News

In recent months a string of school shootings in the United States has rekindled the debate over gun violence, its causes and what can be done to stop it. But amid endless talk of school shootings and AR-15s, a large piece of the puzzle has been left conspicuously absent from the debate.

Contrary to the notion that mass murderers are at the heart of America's gun violence problem, data from recent years reveals that the majority of gun deaths are self-inflicted.

In 2015, suicides accounted for over 60 percent of gun deaths in the U.S., while homicides made up around 36 percent of that year's total. Guns are consistently the most common method by which people take their own lives.

While the causes of America's suicide-driven gun epidemic are complex and myriad, it's clear that one group contributes to the statistics above all others: military veterans.

Beyond the Physical

According to a 2016 study conducted by the Department of Veterans Affairs, on average some 20 veterans commit suicide every single day, making them among the most prone to take their own lives compared to people working in other professions. Though they comprise under 9 percent of the American population, veterans accounted for 18 percent of suicides in the U.S. in 2014.

When veterans return home from chaotic war zones, resuming normal civilian life can present major difficulties. The stresses of wartime create a long-term, sustained "fight-or-flight" response, not only producing physical symptoms such as sweating, shaking or a racing heart rate, but inflicting a mental and moral toll as well.

Post-Traumatic Stress Disorder (PTSD) accounts for some of the physiological effects of trauma, the "fight-or-flight" response, but the distinct mental, moral and spiritual anguish experienced by many veterans and other victims of trauma has been termed " moral injury ."

A better understanding of that concept and the self-harm it motivates could go a long way toward explaining, and ultimately solving, America's suicide epidemic.

"Moral injury looks beyond the physical and asks who we are as people," Peter Van Buren, a former State Department Foreign Service officer, said in an interview. "It says that we know right from wrong, and that when we violate right and wrong, we injure ourselves. We leave a scar on ourselves, the same as if we poked ourselves with a knife."

While not a veteran himself, during his tenure with the Foreign Service Van Buren served for one year alongside American soldiers at a forward operating base in Iraq. His experiences there would stick with him for life.

"Over the course of the year I was there, the units I was embedded with lost three men, and all of them were lost to suicide, not to enemy action," Van Buren said. "This left an extraordinary impression on me, and triggered in me some of the things that I write about."

Van Buren: A profound sense of guilt.

After retiring from the Foreign Service, Van Buren began research for his novel " Hooper's War ," a fictional account set in WWII Japan. The book centers on American veteran, Nate Hooper, and explores the psychological costs paid by those who survive a war. Van Buren said if he set the book in the past, he thought he could better explore the subject matter without the baggage of current-day politics.

In his research, Van Buren interviewed Japanese civilians who were children at the time of the conflict and found surprising parallels with the soldiers he served with in Iraq. Post-war guilt, he found, does not only afflict the combatants who fight and carry out grisly acts of violence, but civilians caught in the crossfire as well.

For many, merely living through a conflict when others did not is cause for significant distress, a condition known as "survivor's guilt."

"In talking with them I heard so many echoes of what I'd heard from the soldiers in Iraq, and so many echoes of what I felt myself, this profound sense of guilt," Van Buren said.

'We Killed Them'

Whether it was something a soldier did, saw or failed to prevent, feelings of guilt can leave a permanent mark on veterans after they come home.

Brian Ellison, a combat veteran who served under the National Guard in Iraq in 2004, said he's still troubled by his wartime experiences.

Stationed at a small, under protected maintenance garage in the town of ad-Diwaniyah in a southeastern province of Iraq, Ellison said his unit was attacked on a daily basis.

"From the day we got there, we would get attacked every night like clockwork -- mortars, RPGs," Ellison said. "We had no protection; we had no weapons systems on the base."

On one night in April of 2004, after a successful mission to obtain ammunition for the base's few heavy weapons, Ellison's unit was ready to hit back.

"So we got some rounds for the Mark 19 [a belt-fed automatic grenade launcher] and we basically used it as field artillery, shot it up in the air and lobbed it in," Ellison said. "Finally on the last night we were able to get them to stop shooting, but that was because we killed 5 of them. At the time this was something I was proud of. We were like 'We got them, we got our revenge.'"

U.S. military poster. (Health.mil)

"In retrospect, it's like here's this foreign army, and we're in their neighborhood," Ellison said. "They're defending their neighborhood, but they're the bad guys and we're the good guys, and we killed them. I think about stuff like that a lot."

Despite his guilt, Ellison said he was able to sort through the negative feelings by speaking openly and honestly about his experiences and actions. Some veterans have a harder time, however, including one of Ellison's closest friends.

"He ended up going overseas like five times," Ellison said. "Now he's retired and he can't even deal with people. He can't deal with people, it's sad. He was this funny guy, everybody's friend, easy to get along with, now he's a recluse. It's really weird to see somebody like that. He had three young kids and a happy personality, now he's broken."

In addition to the problems created in their personal relationships, the morally injured also often turn to self-destructive habits to cope with their despair.

"In the process of trying to shut this sound off in your head -- this voice of conscience -- many people turn to drugs and alcohol as a way of shutting that voice up, at least temporarily," Van Buren said. "You hope at some point it shuts up permanently . . . Unfortunately, I think that many people do look for the permanent silence of suicide as a way of escaping these feelings."

A Hero's Welcome?

By now most are familiar with the practice of celebrating veterans as heroes upon their return from war, but few realize what psychological consequences such apparently benevolent gestures can have.

"I think the healthiest thing a vet can do is to come to terms with reality," Ellison said. "It's so easy to get swept up -- when we came home off the plane, there was a crowd of people cheering for us. I just remember feeling dirty. I felt like 'I don't want you to cheer for us,' but at the same time it's comforting. It's a weird dynamic. Like, I could just put this horror out of my mind and pretend we were heroes."

"But the terrible part is that, behind that there's reality," Ellison said. "Behind that, we know what we were doing; we know that we weren't fighting for freedom. So when somebody clings onto this 'we were heroes' thing, I think that's bad for them. They have to be struggling with it internally. I really believe that's one of the biggest things that contributes to people committing suicide. They're not able to talk about it, not able to bring it to the forefront and come to terms with it."

Unclear Solution

According to the 2016 VA study, 70 percent of veterans who commit suicide are not regular users of VA services.

The Department of Veteran Affairs was set up in 1930 to handle medical care, benefits and burials for veterans, but some 87 years later, the department is plagued by scandal and mismanagement. Long wait times, common to many government-managed healthcare systems, discourage veterans from seeking the department's assistance, especially those with urgent psychiatric needs.

An independent review was carried out in 2014 by the VA's Inspector General, Richard Griffin, which found that at one Arizona VA facility, 1,700 veterans were on wait lists, waiting an average of 115 days before getting an initial appointment.

"People don't generally seek medical help because the [VA] system is so inefficient and ineffective; everyone feels like it's a waste of time," said a retired senior non-commissioned officer in the Special Operations Forces (SOF) who wished to remain anonymous.

"The system is so bad, even within the SOF world where I work, that I avoid going at all costs," the retired officer said. "I try to get my guys to civilian hospitals so that they can get quality healthcare instead of military healthcare."

Beyond institutions, however, both Ellison and Van Buren agreed that speaking openly about their experiences has been a major step on their road back to normalcy. Open dialogue, then, is not only one way for veterans and other victims of trauma to heal, it may ultimately be the key to solving America's epidemic of gun violence.

The factors contributing to mass murders, school shootings and private crime are, no doubt, important to study, but so long as suicide is left out of the public discourse on guns, genuine solutions may always be just out of reach.

https://www.youtube.com/embed/puAJcGfIq7U?feature=oembed

Will Porter is a journalist who specializes in U.S. foreign policy and Middle East affairs. He writes for the Libertarian Institute and tweets at @WKPancap.

If you enjoyed this original article please consider making a donation to Consortium News so we can bring you more stories like this one.

[Jun 10, 2018] It might well be that among the skilles to gain entrance in the Ivy colleges one is the acceptance of neoliberal ideology. Stray too far from the Clinton/Bush/Obama's neoliberalism and identity politics and your application goes into the garbage can and with it your chance of joining our governing elite

Notable quotes:
"... Perhaps, Lin, by voluntarily entering an establishment in order to alter one's consciousness- whether in Vietnam or America- you are signaling your surrender and defeat in the war on the "true nature of reality." ..."
Jun 10, 2018 | www.unz.com

unit472 , June 3, 2018 at 11:57 am GMT

I would agree that the America of the neighborhood tavern is dying but would not characterize our political leadership as a 'rootless, criminal cabal. Criminal they maybe but they are rooted in the Ivy League, principally Yale and Harvard, and the ideology to gain admission to those schools. I would say skills to gain entrance but, today, it is more a matter of ideology. Stray too far from the Clinton/Bush crony capitalist model or Obama's identity politics and your application goes into the garbage can and with it your chance of joining our governing elite.
TG , June 3, 2018 at 2:31 pm GMT
Indeed. I would say this from a slightly different angle: forget about the details of politics: constitutional monarchy, parliamentary democracy, a republic, democratic socialism, even marxism, checks and balances, an independent judiciary, an independent central bank, a written constitution all of these can be made to work, more or less, if the elites care about the nation as whole. And none of these will matter if the elites no longer care, if they value their own short-term profit over the long-term stability and strength of their nation.

Back under FDR etc., the elites of this nation were worried about communists, and anarchists, and then Nazis. That made them care about this nation, they feared that if the nation went down they would go down as well. So they cared about the working class. I am old enough to remember when we used to celebrate that we had the highest wages in the world – that was considered a magnificent joint accomplishment and proof of the greatness of this nation. Now high American wages are routinely derided as evil, as proof that Americans are selfish and lazy and they need to be replaced by all those wonderful third-world refugees who have no alternative but to work for sub-poverty wages

I think the core of this rot is that the elites are no longer afraid. They no longer have reason to care. They live in gated estates, they fly from private airports (even first class in a public airport is not good enough/removed enough from the masses for them!), and if things fall apart they will just sail away in their yachts, tut-tutting about how Americans no longer deserve their presence

Stonehands , June 3, 2018 at 10:21 pm GMT
Perhaps, Lin, by voluntarily entering an establishment in order to alter one's consciousness- whether in Vietnam or America- you are signaling your surrender and defeat in the war on the "true nature of reality."

The alcohol delusion amplifies greed hatred bondage.

And is anathema to wholesome higher insights.

Whether alcohol or heroin these self- ingrained defilements are an obstruction to the complete repose to the human spirit.

Dan , June 4, 2018 at 3:07 am GMT
@TG

Everything is financialized and the elites are supranational. End of story. Enjoy the little things.

JohnnyWalker123 , June 6, 2018 at 5:25 am GMT
@TG

Exactly. America's leaders behave criminally because they're not scared of the population. So there's nothing to constrain our leaders from behaving like grifters and conmen.

At some point, however, this will come to an end. Our massively skyrocketing national debt is totally unpayable, so investors will eventually stop buying our bonds. When that happens, our national economy and standard of living will collapse dramatically.

It's at that point when our leaders are either put in jail or flee the country.

Swan Knight , Website June 9, 2018 at 2:42 pm GMT
@unit472

Rootless criminal cabal sounds right to me. I would add psychopathic

m___ , June 9, 2018 at 2:59 pm GMT
@TG

Elites are global, Americans are locals.

m___ , June 9, 2018 at 3:29 pm GMT
@Dan

elites are supranational

Indeed so.

So is capital, when the dollar will have only limited reserve currency status to the rest of the world, the American locals will be proportionately ruled by Russian oligarchs and Chinese priviledge.

American locals are just bulk humanity to these supranationals, they are defined by global consumerism of the same crap the elites despise. They sweat corn syrup and palm oil and seem to look "Pinker Steve" happy when digitally masturbating and being chemically subdued, encased in concrete scenarios.

Now after consumerism, since it is offset by limited resources of our planet, it will be real misery, as in plowing concrete. That must be mostly indifferent to our supranationals. Bulk humanity is basically obsolete, and extra-ordinary lucky. If it were for the supranational nuclei to have a long term policy, we the deplorables would be wiped away, say three quarters of us.

They are though eagerly observing, if we not, as always, will do it ourselves to us. The problem would die on itself. The ethnic White middle class down to the street is pointing the way.

[Jun 10, 2018] Hiding the Real Number of Unemployed by Pete Dolack

Notable quotes:
"... The Globe and Mail ..."
"... The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China ..."
Jun 08, 2018 | www.counterpunch.org

... ... ...

Nonetheless, you might have noticed that happy days aren't exactly here again. The real U.S. unemployment figure -- all who are counted as unemployed in the "official" rate, plus discouraged workers, the total of those employed part-time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up) -- is 7.6 percent . (This is the "U-6" rate.) That total, too, is less than half of its 2010 peak and is the lowest in several years. But this still doesn't mean the number of people actually working is increasing.

Fewer people at work and they are making less

A better indication of how many people have found work is the "civilian labor force participation rate." By this measure, which includes all people age 16 or older who are not in prison or a mental institution, only 62.7 percent of the potential U.S. workforce was actually in the workforce in May, and that was slightly lower than the previous month. This is just about equal to the lowest this statistic has been since the breakdown of Keynesianism in the 1970s, and down significantly from the peak of 67.3 percent in May 2000. You have to go back to the mid-1970s to find a time when U.S. labor participation was lower. This number was consistently lower in the 1950s and 1960s, but in those days one income was sufficient to support a family. Now everybody works and still can't make ends meet.

And that brings us to the topic of wages. After reaching a peak of 52 percent in 1969, the percentage of the U.S. gross domestic product going to wages has fallen to 43 percent , according to research by the St. Louis branch of the Federal Reserve. The amount of GDP going to wages during the past five years has been the lowest it has been since 1929 , according to a New York Times report. And within the inequality of wages that don't keep up with inflation or productivity gains, the worse-off are doing worse.

The Economic Policy Institute noted , "From 2000 to 2017, wage growth was strongest for the highest-wage workers, continuing the trend in rising wage inequality over the last four decades." The strongest wage growth was for those in the top 10 percent of earnings, which skewed the results sufficiently that the median wage increase for 2017 was a paltry 0.2 percent, the EPI reports. Inflation may have been low, but it wasn't as low as that -- the typical U.S. worker thus suffered a de facto wage decrease last year.

What this sobering news tells us is that good-paying jobs are hard to come by. An EPI researcher, Elise Gould, wrote :

"Slow wage growth tells us that employers continue to hold the cards, and don't have to offer higher wages to attract workers. In other words, workers have very little leverage to bid up their wages. Slow wage growth is evidence that employers and workers both know there are still workers waiting in the wings ready to take a job, even if they aren't actively looking for one."

The true unemployment rates in Canada and Europe

We find similar patterns elsewhere. In Canada, the official unemployment rate held at 5.8 percent in April , the lowest it has been since 1976, although there was a slight decrease in the number of people working in March, mainly due to job losses in wholesale and retail trade and construction. What is the actual unemployment rate? According to Statistics Canada's R8 figure , it is 8.6 percent. The R8 counts count people in part-time work, including those wanting full-time work, as "full-time equivalents," thus underestimating the number of under-employed.

At the end of 2012, the R8 figure was 9.4 percent , but an analysis published by The Globe and Mail analyzing unemployment estimated the true unemployment rate for that year to be 14.2 percent. If the current statistical miscalculation is proportionate, then the true Canadian unemployment rate currently must be north of 13 percent. "[T]he narrow scope of the Canadian measure significantly understates labour underutilization," the Globe and Mail analysis conclude.

Similar to its southern neighbor, Canada's labor force participation rate has steadily declined, falling to 65.4 percent in April 2018 from a high of 67.7 percent in 2003.

The most recent official unemployment figure in Britain 4.2 percent. The true figure is rather higher. How much higher is difficult to determine, but a September 2012 report by Sheffield Hallam University found that the total number of unemployed in Britain was more than 3.4 million in April of that year although the Labour Force Survey, from which official unemployment statistics are derived, reported only 2.5 million. So if we assume a similar ratio, then the true rate of unemployment across the United Kingdom is about 5.7 percent.

The European Union reported an official unemployment rate of 7.1 percent (with Greece having the highest total at 20.8 percent). The EU's Eurostat service doesn't provide an equivalent of a U.S. U-6 or a Canadian R8, but does separately provide totals for under-employed part-time workers and "potential additional labour force"; adding these two would effectively double the true EU rate of unemployed and so the actual figure must be about 14 percent.

Australia's official seasonally adjusted unemployment rate is 5.6 percent , according to the country's Bureau of Statistics. The statistic that would provide a more realistic measure, the "extended labour force under-utilisation" figure, seems to be well hidden. The most recent figure that could be found was for February 2017, when the rate was given as 15.4 percent. As the "official" unemployment rate at the time was 5.8 percent, it is reasonable to conclude that the real Australian unemployment rate is currently above 15 percent.

Mirroring the pattern in North America, global employment is on the decline. The International Labour Organization estimated the world labor force participation rate as 61.9 percent for 2017, a steady decline from the 65.7 percent estimated for 1990.

Stagnant wages despite productivity growth around the world

Concomitant with the high numbers of people worldwide who don't have proper employment is the stagnation of wages. Across North America and Europe, productivity is rising much faster than wages. A 2017 study found that across those regions median real wage growth since the mid-1980s has not kept pace with labor productivity growth.

Not surprisingly, the United States had the largest gap between wages and productivity. Germany was second in this category, perhaps not surprising, either, because German workers have suffered a long period of wage cuts (adjusted for inflation) since the Social Democratic Party codified austerity by instituting Gerhard Schröder's "Agenda 2010" legislation. Despite this disparity, the U.S. Federal Reserve issued a report in 2015 declaring the problem of economic weakness is due to wages not falling enough . Yes, the Fed believes your wages are too high.

The lag of wages as compared to rising productivity is an ongoing global phenomenon. A separate statistical analysis from earlier this decade also demonstrated this pattern for working people in Canada, the United States, Britain, France, Germany, Italy and Japan. Workers in both Canada and the United States take home hundreds of dollars less per week than they would if wages had kept up with productivity gains.

In an era of runaway corporate globalization, there is ever more precarity. On a global scale, having regular employment is actually unusual. Using International Labour Organization figures as a starting point, John Bellamy Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals 2.4 billion. In contrast, the world's wage workers total 1.4 billion. Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China , they write:

"It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well." [page 145]

Having conquered virtually every corner of the globe and with nowhere left to expand into nor new markets to take, capitalists will continue to cut costs -- in the first place, wages and benefits -- in their ceaseless scrambles to sustain their accustomed profits. There is no reform that can permanently alter this relentless internal logic of capitalism. Although she was premature, Rosa Luxemburg's forecast of socialism or barbarism draws nearer.

Pete Dolack writes the Systemic Disorder blog and has been an activist with several groups. His book, It's Not Over: Learning From the Socialist Experiment , is available from Zero Books.

[Jun 06, 2018] The Gilded Zip Code

Notable quotes:
"... You arrive at the Supercuts fresh from your stroll, but the nice lady who cuts your hair is looking stressed. You'll discover that she commutes an hour through jammed highways to work. The gas guy does, too, and the tile guy comes in from another state. None of them can afford to live around here. The rent is too damn high. ..."
"... The Gated City ..."
Jun 06, 2018 | www.theatlantic.com

From my Brookline home, it's a pleasant, 10-minute walk to get a haircut. Along the way, you pass immense elm trees and brochure-ready homes beaming in their reclaimed Victorian glory. Apart from a landscaper or two, you are unlikely to spot a human being in this wilderness of oversize closets, wood-paneled living rooms, and Sub-Zero refrigerators.

If you do run into a neighbor, you might have a conversation like this: "Our kitchen remodel went way over budget. We had to fight just to get the tile guy to show up!" "I know! We ate Thai takeout for a month because the gas guy's car kept breaking down!"

You arrive at the Supercuts fresh from your stroll, but the nice lady who cuts your hair is looking stressed. You'll discover that she commutes an hour through jammed highways to work. The gas guy does, too, and the tile guy comes in from another state. None of them can afford to live around here. The rent is too damn high.

From 1980 to 2016, home values in Boston multiplied 7.6 times. When you take account of inflation, they generated a return of 157 percent to their owners. San Francisco returned 162 percent in real terms over the same period; New York, 115 percent; and Los Angeles, 114 percent. If you happen to live in a neighborhood like mine, you are surrounded by people who consider themselves to be real-estate geniuses.

(That's one reason we can afford to make so many mistakes in the home-renovation department.) If you live in St. Louis (3 percent) or Detroit (minus 16 percent), on the other hand, you weren't so smart. In 1980, a house in St. Louis would trade for a decent studio apartment in Manhattan.

Today that house will buy an 80-square-foot bathroom in the Big Apple.

Related Story

The returns on (the right kind of) real estate have been so extraordinary that, according to some economists, real estate alone may account for essentially all of the increase in wealth concentration over the past half century. It's not surprising that the values are up in the major cities: These are the gold mines of our new economy. Yet there is a paradox. The rent is so high that people -- notably people in the middle class -- are leaving town rather than working the mines. From 2000 to 2009, the San Francisco Bay Area had some of the highest salaries in the nation, and yet it lost 350,000 residents to lower-paying regions.

Across the United States, the journalist and economist Ryan Avent writes in The Gated City , "the best opportunities are found in one place, and for some reason most Americans are opting to live in another."

According to estimates from the economists Enrico Moretti and Chang-Tai Hsieh, the migration away from the productive centers of New York, San Francisco, and San Jose alone lopped 9.7 percent off total U.S. growth from 1964 to 2009 .

It is well known by now that the immediate cause of the insanity is the unimaginable pettiness of backyard politics. Local zoning regulation imposes excessive restrictions on housing development and drives up prices. What is less well understood is how central the process of depopulating the economic core of the nation is to the intertwined stories of rising inequality and falling social mobility.

Real-estate inflation has brought with it a commensurate increase in economic segregation. Every hill and dale in the land now has an imaginary gate, and it tells you up front exactly how much money you need to stay there overnight. Educational segregation has accelerated even more. In my suburb of Boston, 53 percent of adults have a graduate degree. In the suburb just south, that figure is 9 percent.

This economic and educational sorting of neighborhoods is often represented as a matter of personal preference, as in red people like to hang with red, and blue with blue. In reality, it's about the consolidation of wealth in all its forms, starting, of course, with money. Gilded zip codes are located next to giant cash machines: a too-big-to-fail bank, a friendly tech monopoly, and so on. Local governments, which collected a record $523 billion in property taxes in 2016, make sure that much of the money stays close to home.

But proximity to economic power isn't just a means of hoarding the pennies; it's a force of natural selection. Gilded zip codes deliver higher life expectancy, more-useful social networks, and lower crime rates. Lengthy commutes, by contrast, cause obesity, neck pain, stress, insomnia, loneliness, and divorce, as Annie Lowrey reported in Slate . One study found that a commute of 45 minutes or longer by one spouse increased the chance of divorce by 40 percent .

Nowhere are the mechanics of the growing geographic divide more evident than in the system of primary and secondary education. Public schools were born amid hopes of opportunity for all; the best of them have now been effectively reprivatized to better serve the upper classes. According to a widely used school-ranking service, out of more than 5,000 public elementary schools in California, the top 11 are located in Palo Alto. They're free and open to the public. All you have to do is move into a town where the median home value is $3,211,100. Scarsdale, New York, looks like a steal in comparison: The public high schools in that area funnel dozens of graduates to Ivy League colleges every year, and yet the median home value is a mere $1,403,600.

Racial segregation has declined with the rise of economic segregation. We in the 9.9 percent are proud of that. What better proof that we care only about merit? But we don't really want too much proof. Beyond a certain threshold -- 5 percent minority or 20 percent, it varies according to the mood of the region -- neighborhoods suddenly go completely black or brown. It is disturbing, but perhaps not surprising, to find that social mobility is lower in regions with high levels of racial segregation. The fascinating revelation in the data, however, is that the damage isn't limited to the obvious victims. According to Raj Chetty's research team , "There is evidence that higher racial segregation is associated with lower social mobility for white people." The relationship doesn't hold in every zone of the country, to be sure, and is undoubtedly the statistical reflection of a more complex set of social mechanisms. But it points to a truth that America's 19th-century slaveholders understood very well: Dividing by color remains an effective way to keep all colors of the 90 percent in their place.

With localized wealth comes localized political power, and not just of the kind that shows up in voting booths. Which brings us back to the depopulation paradox. Given the social and cultural capital that flows through wealthy neighborhoods, is it any wonder that we can defend our turf in the zoning wars? We have lots of ways to make that sound public-spirited. It's all about saving the local environment, preserving the historic character of the neighborhood, and avoiding overcrowding. In reality, it's about hoarding power and opportunity inside the walls of our own castles. This is what aristocracies do.

Zip code is who we are. It defines our style, announces our values, establishes our status, preserves our wealth, and allows us to pass it along to our children. It's also slowly strangling our economy and killing our democracy. It is the brick-and-mortar version of the Gatsby Curve. The traditional story of economic growth in America has been one of arriving, building, inviting friends, and building some more. The story we're writing looks more like one of slamming doors shut behind us and slowly suffocating under a mass of commercial-grade kitchen appliances.

7. Our Blind Spot

In my family, Aunt Sarah was the true believer. According to her version of reality, the family name was handed down straight from the ancient kings of Scotland. Great-great-something-grandfather William Stewart, a soldier in the Continental Army, was seated at the right hand of George Washington. And Sarah herself was somehow descended from "Pocahontas's sister." The stories never made much sense. But that didn't stop Sarah from believing in them. My family had to be special for a reason.

The 9.9 percent are different. We don't delude ourselves about the ancient sources of our privilege. That's because, unlike Aunt Sarah and her imaginary princesses, we've convinced ourselves that we don't have any privilege at all.

Consider the reception that at least some members of our tribe have offered to those who have foolishly dared to draw attention to our advantages. Last year, when the Brookings Institution researcher Richard V. Reeves, following up on his book Dream Hoarders , told the readers of The New York Times to "Stop Pretending You're Not Rich," many of those readers accused him of engaging in "class warfare," of writing "a meaningless article," and of being "rife with guilt."

In her incisive portrait of my people, Uneasy Street , the sociologist Rachel Sherman documents the syndrome. A number among us, when reminded of our privilege, respond with a counternarrative that generally goes like this: I was born in the street. I earned everything all by myself. I barely get by on my $250,000 salary. You should see the other parents at our kids' private school.

In part what we have here is a listening problem. Americans have trouble telling the difference between a social critique and a personal insult. Thus, a writer points to a broad social problem with complex origins, and the reader responds with, "What, you want to punish me for my success?"

In part, too, we're seeing some garden-variety self-centeredness, enabled by the usual cognitive lapses. Human beings are very good at keeping track of their own struggles; they are less likely to know that individuals on the other side of town are working two minimum-wage jobs to stay afloat, not watching Simpsons reruns all day. Human beings have a simple explanation for their victories: I did it . They easily forget the people who handed them the crayon and set them up for success. Human beings of the 9.9 percent variety also routinely conflate the stress of status competition with the stress of survival. No, failing to get your kid into Stanford is not a life-altering calamity.

The recency of it all may likewise play a role in our failure to recognize our growing privileges. It has taken less than one lifetime for the (never fully formed) meritocracy to evolve into a (fledgling) aristocracy. Class accretes faster than we think. It's our awareness that lags, trapping us within the assumptions into which we were born.

And yet, even allowing for these all-too-human failures of cognition, the cries of anguish that echo across the soccer fields at the mere suggestion of unearned privilege are too persistent to ignore. Fact-challenged though they may be, they speak to a certain, deeper truth about life in the 9.9 percent. What they are really telling us is that being an aristocrat is not quite what it is cracked up to be.

A strange truth about the Gatsby Curve is that even as it locks in our privileges, it doesn't seem to make things all that much easier. I know it wasn't all that easy growing up in the Colonel's household, for example. The story that Grandfather repeated more than any other was the one where, following some teenage misdemeanor of his, his father, the 250-pound, 6-foot-something onetime Rough Rider, smacked him so hard that he sailed clear across the room and landed flat on the floor. Everything -- anything -- seemed to make the Colonel angry.

Jay Gatsby might have understood. Life in West Egg is never as serene as it seems. The Princeton man -- that idle prince of leisure who coasts from prep school to a life of ease -- is an invention of our lowborn ancestors. It's what they thought they saw when they were looking up. West Eggers understand very well that a bad move or an unlucky break (or three or four) can lead to a steep descent. We know just how expensive it is to live there, yet living off the island is unthinkable. We have intuited one of the fundamental paradoxes of life on the Gatsby Curve: The greater the inequality, the less your money buys.

We feel in our bones that class works only for itself; that every individual is dispensable; that some of us will be discarded and replaced with fresh blood. This insecurity of privilege only grows as the chasm beneath the privileged class expands. It is the restless engine that drives us to invest still more time and energy in the walls that will keep us safe by keeping others out.

Perhaps the best evidence for the power of an aristocracy is the degree of resentment it provokes. By that measure, the 9.9 percent are doing pretty well indeed.

Here's another fact of life in West Egg: Someone is always above you. In Gatsby's case, it was the old-money people of East Egg. In the Colonel's case, it was John D. Rockefeller Jr. You're always trying to please them, and they're always ready to pull the plug.

The source of the trouble, considered more deeply, is that we have traded rights for privileges. We're willing to strip everyone, including ourselves, of the universal right to a good education, adequate health care, adequate representation in the workplace, genuinely equal opportunities, because we think we can win the game. But who, really, in the end, is going to win this slippery game of escalating privileges?

Under the circumstances, delusions are understandable. But that doesn't make them salutary, as Aunt Sarah discovered too late. Even as the last few pennies of the Colonel's buck trickled down to my father's generation, she still had the big visions that corresponded to her version of the family mythology. Convinced that she had inherited a head for business, she bet her penny on the dot-com bubble. In her final working years, she donned a red-and-black uniform and served burgers at a Wendy's in the vicinity of Jacksonville, Florida.

[Jun 06, 2018] The Privilege of an Education

Notable quotes:
"... At this point, I'm wondering whether life was easier in the old days, when you could buy a spot in the elite university of your choice with cold cash. Then I remind myself that Grandfather lasted only one year at Yale. In those days, the Ivies kicked you out if you weren't ready for action. Today, you have to self-combust in a newsworthy way before they show you the door. ..."
"... Excellent Sheep ..."
"... The Price of Admission ..."
"... In the United States, the premium that college graduates earn over their non-college-educated peers in young adulthood exceeds 70 percent. ..."
"... All of this comes before considering the all-consuming difference between "good" schools and the rest. Ten years after starting college, according to data from the Department of Education, the top decile of earners from all schools had a median salary of $68,000 . But the top decile from the 10 highest-earning colleges raked in $220,000 -- make that $250,000 for No. 1, Harvard -- and the top decile at the next 30 colleges took home $157,000. (Not surprisingly, the top 10 had an average acceptance rate of 9 percent, and the next 30 were at 19 percent.) ..."
"... But the fact is that degree holders earn so much more than the rest not primarily because they are better at their job, but because they mostly take different categories of jobs. Well over half of Ivy League graduates, for instance, typically go straight into one of four career tracks that are generally reserved for the well educated: finance, management consulting, medicine, or law. To keep it simple, let's just say that there are two types of occupations in the world: those whose members have collective influence in setting their own pay, and those whose members must face the music on their own. It's better to be a member of the first group. Not surprisingly, that is where you will find the college crowd. ..."
"... The candy-hurling godfather of today's meritocratic class, of course, is the financial-services industry. Americans now turn over $1 of every $12 in GDP to the financial sector; in the 1950s, the bankers were content to keep only $1 out of $40. ..."
"... It isn't a coincidence that the education premium surged during the same years that membership in trade unions collapsed. In 1954, 28 percent of all workers were members of trade unions, but by 2017 that figure was down to 11 percent. ..."
"... Education -- the thing itself , not the degree -- is always good. A genuine education opens minds and makes good citizens. It ought to be pursued for the sake of society . In our unbalanced system, however, education has been reduced to a private good, justifiable only by the increments in graduates' paychecks. Instead of uniting and enriching us, it divides and impoverishes. ..."
"... If the system can be gamed, well then, our ability to game the system has become the new test of merit. ..."
Jun 06, 2018 | newrepublic.com

My 16-year-old daughter is sitting on a couch, talking with a stranger about her dreams for the future. We're here, ominously enough, because, she says, "all my friends are doing it." For a moment, I wonder whether we have unintentionally signed up for some kind of therapy. The professional woman in the smart-casual suit throws me a pointed glance and says, "It's normal to be anxious at a time like this." She really does see herself as a therapist of sorts. But she does not yet seem to know that the source of my anxiety is the idea of shelling out for a $12,000 "base package" of college-counseling services whose chief purpose is apparently to reduce my anxiety. Determined to get something out of this trial counseling session, I push for recommendations on summer activities. We leave with a tip on a 10-day "cultural tour" of France for high schoolers. In the college-application business, that's what's known as an "enrichment experience." When we get home, I look it up. The price of enrichment: $11,000 for the 10 days.

That's when I hear the legend of the SAT whisperer. If you happen to ride through the yellow-brown valleys of the California coast, past the designer homes that sprout wherever tech unicorns sprinkle their golden stock offerings, you might come across him. His high-school classmates still remember him, almost four decades later, as one of the child wonders of the age. Back then, he and his equally precocious siblings showed off their preternatural verbal and musical talents on a local television program. Now his clients fly him around the state for test-prep sessions with their 16-year-olds. You can hire him for $750, plus transportation, per two-hour weekend session. (There is a weekday discount.) Some of his clients book him every week for a year.

Affirmative-action programs are to some degree an extension of the system of wealth preservation. They indulge rich people in the belief that their college is open to all.

At this point, I'm wondering whether life was easier in the old days, when you could buy a spot in the elite university of your choice with cold cash. Then I remind myself that Grandfather lasted only one year at Yale. In those days, the Ivies kicked you out if you weren't ready for action. Today, you have to self-combust in a newsworthy way before they show you the door.

Inevitably, I begin rehearsing the speech for my daughter. It's perfectly possible to lead a meaningful life without passing through a name-brand college, I'm going to say. We love you for who you are. We're not like those tacky strivers who want a back-windshield sticker to testify to our superior parenting skills. And why would you want to be an investment banker or a corporate lawyer anyway? But I refrain from giving the speech, knowing full well that it will light up her parental-bullshit detector like a pair of khakis on fire.

The skin colors of the nation's elite student bodies are more varied now, as are their genders, but their financial bones have calcified over the past 30 years. In 1985, 54 percent of students at the 250 most selective colleges came from families in the bottom three quartiles of the income distribution. A similar review of the class of 2010 put that figure at just 33 percent. According to a 2017 study, 38 elite colleges -- among them five of the Ivies -- had more students from the top 1 percent than from the bottom 60 percent . In his 2014 book, Excellent Sheep , William Deresiewicz, a former English professor at Yale, summed up the situation nicely: "Our new multiracial, gender-neutral meritocracy has figured out a way to make itself hereditary."

The wealthy can also draw on a variety of affirmative-action programs designed just for them. As Daniel Golden points out in The Price of Admission , legacy-admissions policies reward those applicants with the foresight to choose parents who attended the university in question. Athletic recruiting, on balance and contrary to the popular wisdom, also favors the wealthy, whose children pursue lacrosse, squash, fencing, and the other cost-intensive sports at which private schools and elite public schools excel. And, at least among members of the 0.1 percent, the old-school method of simply handing over some of Daddy's cash has been making a comeback. ( Witness Jared Kushner, Harvard graduate .)

The mother lode of all affirmative-action programs for the wealthy, of course, remains the private school. Only 2.2 percent of the nation's students graduate from nonsectarian private high schools, and yet these graduates account for 26 percent of students at Harvard and 28 percent of students at Princeton. The other affirmative-action programs, the kind aimed at diversifying the look of the student body, are no doubt well intended. But they are to some degree merely an extension of this system of wealth preservation. Their function, at least in part, is to indulge rich people in the belief that their college is open to all on the basis of merit.

The plummeting admission rates of the very top schools nonetheless leave many of the children of the 9.9 percent facing long odds. But not to worry, junior 9.9 percenters! We've created a new range of elite colleges just for you. Thanks to ambitious university administrators and the ever-expanding rankings machine at U.S. News & World Report , 50 colleges are now as selective as Princeton was in 1980, when I applied. The colleges seem to think that piling up rejections makes them special. In fact, it just means that they have collectively opted to deploy their massive, tax-subsidized endowments to replicate privilege rather than fulfill their duty to produce an educated public.

The only thing going up as fast as the rejection rates at selective colleges is the astounding price of tuition. Measured relative to the national median salary, tuition and fees at top colleges more than tripled from 1963 to 2013. Throw in the counselors, the whisperers, the violin lessons, the private schools, and the cost of arranging for Junior to save a village in Micronesia, and it adds up. To be fair, financial aid closes the gap for many families and keeps the average cost of college from growing as fast as the sticker price. But that still leaves a question: Why are the wealthy so keen to buy their way in?

The short answer, of course, is that it's worth it.

In the United States, the premium that college graduates earn over their non-college-educated peers in young adulthood exceeds 70 percent. The return on education is 50 percent higher than what it was in 1950, and is significantly higher than the rate in every other developed country. In Norway and Denmark, the college premium is less than 20 percent; in Japan, it is less than 30 percent; in France and Germany, it's about 40 percent.

All of this comes before considering the all-consuming difference between "good" schools and the rest. Ten years after starting college, according to data from the Department of Education, the top decile of earners from all schools had a median salary of $68,000 . But the top decile from the 10 highest-earning colleges raked in $220,000 -- make that $250,000 for No. 1, Harvard -- and the top decile at the next 30 colleges took home $157,000. (Not surprisingly, the top 10 had an average acceptance rate of 9 percent, and the next 30 were at 19 percent.)

It is entirely possible to get a good education at the many schools that don't count as "good" in our brand-obsessed system. But the "bad" ones really are bad for you. For those who made the mistake of being born to the wrong parents, our society offers a kind of virtual education system. It has places that look like colleges -- but aren't really. It has debt -- and that, unfortunately, is real. The people who enter into this class hologram do not collect a college premium; they wind up in something more like indentured servitude.

So what is the real source of this premium for a "good education" that we all seem to crave?

One of the stories we tell ourselves is that the premium is the reward for the knowledge and skills the education provides us. Another, usually unfurled after a round of drinks, is that the premium is a reward for the superior cranial endowments we possessed before setting foot on campus. We are, as some sociologists have delicately put it, a "cognitive elite."

Behind both of these stories lies one of the founding myths of our meritocracy. One way or the other, we tell ourselves, the rising education premium is a direct function of the rising value of meritorious people in a modern economy. That is, not only do the meritorious get ahead, but the rewards we receive are in direct proportion to our merit.

But the fact is that degree holders earn so much more than the rest not primarily because they are better at their job, but because they mostly take different categories of jobs. Well over half of Ivy League graduates, for instance, typically go straight into one of four career tracks that are generally reserved for the well educated: finance, management consulting, medicine, or law. To keep it simple, let's just say that there are two types of occupations in the world: those whose members have collective influence in setting their own pay, and those whose members must face the music on their own. It's better to be a member of the first group. Not surprisingly, that is where you will find the college crowd.

why do America's doctors make twice as much as those of other wealthy countries? Given that the United States has placed dead last five times running in the Commonwealth Fund's ranking of health-care systems in high-income countries, it's hard to argue that they are twice as gifted at saving lives. Dean Baker, a senior economist with the Center for Economic and Policy Research, has a more plausible suggestion : "When economists like me look at medicine in America -- whether we lean left or right politically -- we see something that looks an awful lot like a cartel." Through their influence on the number of slots at medical schools, the availability of residencies, the licensing of foreign-trained doctors, and the role of nurse practitioners, physicians' organizations can effectively limit the competition their own members face -- and that is exactly what they do.

Lawyers (or at least a certain elite subset of them) have apparently learned to play the same game. Even after the collapse of the so-called law-school bubble, America's lawyers are No. 1 in international salary rankings and earn more than twice as much, on average, as their wig-toting British colleagues. The University of Chicago law professor Todd Henderson, writing for Forbes in 2016, offered a blunt assessment : "The American Bar Association operates a state-approved cartel."

Similar occupational licensing schemes provide shelter for the meritorious in a variety of other sectors. The policy researchers Brink Lindsey and Steven Teles detail the mechanisms in The Captured Economy . Dentists' offices, for example, have a glass ceiling that limits what dental hygienists can do without supervision, keeping their bosses in the 9.9 percent. Copyright and patent laws prop up profits and salaries in the education-heavy pharmaceutical, software, and entertainment sectors. These arrangements are trifles, however, compared with what's on offer in tech and finance, two of the most powerful sectors of the economy.

By now we're thankfully done with the tech-sector fairy tales in which whip-smart cowboys innovate the heck out of a stodgy status quo. The reality is that five monster companies -- you know the names -- are worth about $3.5 trillion combined, and represent more than 40 percent of the market capital on the nasdaq stock exchange. Much of the rest of the technology sector consists of virtual entities waiting patiently to feed themselves to these beasts.

Let's face it: This is Monopoly money with a smiley emoji. Our society figured out some time ago how to deal with companies that attempt to corner the market on viscous substances like oil. We don't yet know what to do with the monopolies that arise out of networks and scale effects in the information marketplace. Until we do, the excess profits will stick to those who manage to get closest to the information honeypot. You can be sure that these people will have a great deal of merit.

The candy-hurling godfather of today's meritocratic class, of course, is the financial-services industry. Americans now turn over $1 of every $12 in GDP to the financial sector; in the 1950s, the bankers were content to keep only $1 out of $40. The game is more sophisticated than a two-fisted money grab, but its essence was made obvious during the 2008 financial crisis. The public underwrites the risks; the financial gurus take a seat at the casino; and it's heads they win, tails we lose. The financial system we now have is not a product of nature. It has been engineered, over decades, by powerful bankers, for their own benefit and for that of their posterity.

Who is not in on the game? Auto workers, for example. Caregivers. Retail workers. Furniture makers. Food workers. The wages of American manufacturing and service workers consistently hover in the middle of international rankings. The exceptionalism of American compensation rates comes to an end in the kinds of work that do not require a college degree.

You see, when educated people with excellent credentials band together to advance their collective interest, it's all part of serving the public good by ensuring a high quality of service, establishing fair working conditions, and giving merit its due. That's why we do it through "associations," and with the assistance of fellow professionals wearing white shoes. When working-class people do it -- through unions -- it's a violation of the sacred principles of the free market. It's thuggish and anti-modern. Imagine if workers hired consultants and "compensation committees," consisting of their peers at other companies, to recommend how much they should be paid. The result would be -- well, we know what it would be, because that's what CEOs do.

It isn't a coincidence that the education premium surged during the same years that membership in trade unions collapsed. In 1954, 28 percent of all workers were members of trade unions, but by 2017 that figure was down to 11 percent.

Education -- the thing itself , not the degree -- is always good. A genuine education opens minds and makes good citizens. It ought to be pursued for the sake of society . In our unbalanced system, however, education has been reduced to a private good, justifiable only by the increments in graduates' paychecks. Instead of uniting and enriching us, it divides and impoverishes. Which is really just a way of saying that our worthy ideals of educational opportunity are ultimately no match for the tidal force of the Gatsby Curve. The metric that has tracked the rising college premium with the greatest precision is -- that's right -- intergenerational earnings elasticity, or IGE. Across countries, the same correlation obtains: the higher the college premium, the lower the social mobility.

As I'm angling all the angles for my daughter's college applications -- the counselor is out, and the SAT whisperer was never going to happen -- I realize why this delusion of merit is so hard to shake. If I -- I mean, she -- can pull this off, well, there's the proof that we deserve it! If the system can be gamed, well then, our ability to game the system has become the new test of merit.

So go ahead and replace the SATs with shuffleboard on the high seas, or whatever you want. Who can doubt that we'd master that game, too? How quickly would we convince ourselves of our absolute entitlement to the riches that flow directly and tangibly from our shuffling talent? How soon before we perfected the art of raising shuffleboard wizards? Would any of us notice or care which way the ship was heading?

Let's suppose that some of us do look up. We see the iceberg. Will that induce us to diminish our exertions in supreme child-rearing? The grim truth is that, as long as good parenting and good citizenship are in conflict, we're just going to pack a few more violins for the trip.

[Jun 06, 2018] Top 10 percent of US households control nearly 75 percent of all wealth Average Americans pretend to be temporarily embarrassed millionaires by going further into debt

Top ten percent are millionaires. you need approximately 1,2 million dollars of net worth to get into this category. United States Net Worth Brackets, Percentiles, and Top One Percent - DQYDJ
Jun 06, 2018 | www.mybudget360.com

We currently exist in a land of financial contradictions. US household incomes adjusting for inflation are back to levels last seen in the late 1980s. However, holiday spending is going strongly largely by people going into big debt . Many are going to be paying for the holiday season of 2013 deep into years to come. More troubling than spending via debt is the record level of wealth inequality in the United States.

We would need to go back to the Gilded Age to find similar levels of wealth inequality.

The latest data shows that roughly 75 percent of the financial wealth in America is held in the hands of the top 10 percent of households. Or to invert this, 25 percent of all US wealth is divided up amongst the bottom 90 percent of the population.

Wealth is the true measure of financial stability. It used to be the case that housing was the one safe store of wealth for Americans but Wall Street has hijacked this asset class and has converted it to another commodity to speculate on. Yet by looking at spending habits and financial behavior many Americans think they are simply temporarily embarrassed millionaires.

They act against their own interests while wealth inequality rages on.

[Jun 06, 2018] The Birth of the New American Aristocracy

Images were deleted. Refer to the original link for full text.
Notable quotes:
"... According to Miles Corak, an economics professor at the City University of New York, half a century ago IGE in America was less than 0.3 . Today, it is about 0.5. In America, the game is half over once you've selected your parents. IGE is now higher here than in almost every other developed economy. On this measure of economic mobility, the United States is more like Chile or Argentina than Japan or Germany. ..."
"... Social Register ..."
"... Obesity, diabetes, heart disease, kidney disease, and liver disease are all two to three times more common in individuals who have a family income of less than $35,000 than in those who have a family income greater than $100,000. Among low-educated, middle-aged whites, the death rate in the United States -- alone in the developed world -- increased in the first decade and a half of the 21st century. Driving the trend is the rapid growth in what the Princeton economists Anne Case and Angus Deaton call "deaths of despair" -- suicides and alcohol- and drug-related deaths. ..."
"... Why can't they get their act together? ..."
"... This article appears in the June 2018 print edition with the headline "The Birth of a New American Aristocracy." ..."
Jun 06, 2018 | www.theatlantic.com

... ... ...

At the end of each week, we would return to our place. My reality was the aggressively middle-class world of 1960s and '70s U.S. military bases and the communities around them. Life was good there, too, but the pizza came from a box, and it was Lucky Charms for breakfast. Our glory peaked on the day my parents came home with a new Volkswagen camper bus. As I got older, the holiday pomp of patriotic luncheons and bridge-playing rituals came to seem faintly ridiculous and even offensive, like an endless birthday party for people whose chief accomplishment in life was just showing up. I belonged to a new generation that believed in getting ahead through merit, and we defined merit in a straightforward way: test scores, grades, competitive résumé-stuffing, supremacy in board games and pickup basketball, and, of course, working for our keep. For me that meant taking on chores for the neighbors, punching the clock at a local fast-food restaurant, and collecting scholarships to get through college and graduate school. I came into many advantages by birth, but money was not among them.

The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people's children.

I've joined a new aristocracy now, even if we still call ourselves meritocratic winners. If you are a typical reader of The Atlantic , you may well be a member too. (And if you're not a member, my hope is that you will find the story of this new class even more interesting -- if also more alarming.) To be sure, there is a lot to admire about my new group, which I'll call -- for reasons you'll soon see -- the 9.9 percent. We've dropped the old dress codes, put our faith in facts, and are (somewhat) more varied in skin tone and ethnicity. People like me, who have waning memories of life in an earlier ruling caste, are the exception, not the rule.

By any sociological or financial measure, it's good to be us. It's even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below. But we do have a blind spot, and it is located right in the center of the mirror: We seem to be the last to notice just how rapidly we've morphed, or what we've morphed into.

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The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people's children. We are not innocent bystanders to the growing concentration of wealth in our time. We are the principal accomplices in a process that is slowly strangling the economy, destabilizing American politics, and eroding democracy. Our delusions of merit now prevent us from recognizing the nature of the problem that our emergence as a class represents. We tend to think that the victims of our success are just the people excluded from the club. But history shows quite clearly that, in the kind of game we're playing, everybody loses badly in the end.

2. The Discreet Charm of the 9.9 Percent

Let's talk first about money -- even if money is only one part of what makes the new aristocrats special. There is a familiar story about rising inequality in the United States, and its stock characters are well known. The villains are the fossil-fueled plutocrat, the Wall Street fat cat, the callow tech bro, and the rest of the so-called top 1 percent. The good guys are the 99 percent, otherwise known as "the people" or "the middle class." The arc of the narrative is simple: Once we were equal, but now we are divided. The story has a grain of truth to it. But it gets the characters and the plot wrong in basic ways.

It is in fact the top 0.1 percent who have been the big winners in the growing concentration of wealth over the past half century. According to the UC Berkeley economists Emmanuel Saez and Gabriel Zucman, the 160,000 or so households in that group held 22 percent of America's wealth in 2012 , up from 10 percent in 1963. If you're looking for the kind of money that can buy elections, you'll find it inside the top 0.1 percent alone.


A Tale of Three Classes ( Figure 1 ):
The 9.9 percent hold most of the wealth in the United States.

Saez / Zucman

Every piece of the pie picked up by the 0.1 percent, in relative terms, had to come from the people below. But not everyone in the 99.9 percent gave up a slice. Only those in the bottom 90 percent did. At their peak, in the mid-1980s, people in this group held 35 percent of the nation's wealth. Three decades later that had fallen 12 points -- exactly as much as the wealth of the 0.1 percent rose.

In between the top 0.1 percent and the bottom 90 percent is a group that has been doing just fine. It has held on to its share of a growing pie decade after decade. And as a group, it owns substantially more wealth than do the other two combined. In the tale of three classes (see Figure 1), it is represented by the gold line floating high and steady while the other two duke it out. You'll find the new aristocracy there. We are the 9.9 percent.

So what kind of characters are we, the 9.9 percent? We are mostly not like those flamboyant political manipulators from the 0.1 percent. We're a well-behaved, flannel-suited crowd of lawyers, doctors, dentists, mid-level investment bankers, M.B.A.s with opaque job titles, and assorted other professionals -- the kind of people you might invite to dinner. In fact, we're so self-effacing, we deny our own existence. We keep insisting that we're "middle class."

As of 2016, it took $1.2 million in net worth to make it into the 9.9 percent; $2.4 million to reach the group's median; and $10 million to get into the top 0.9 percent. (And if you're not there yet, relax: Our club is open to people who are on the right track and have the right attitude.) "We are the 99 percent" sounds righteous, but it's a slogan, not an analysis. The families at our end of the spectrum wouldn't know what to do with a pitchfork.

We are also mostly, but not entirely, white. According to a Pew Research Center analysis, African Americans represent 1.9 percent of the top 10th of households in wealth; Hispanics, 2.4 percent; and all other minorities, including Asian and multiracial individuals, 8.8 percent -- even though those groups together account for 35 percent of the total population.

One of the hazards of life in the 9.9 percent is that our necks get stuck in the upward position. We gaze upon the 0.1 percent with a mixture of awe, envy, and eagerness to obey. As a consequence, we are missing the other big story of our time. We have left the 90 percent in the dust -- and we've been quietly tossing down roadblocks behind us to make sure that they never catch up.

Let's suppose that you start off right in the middle of the American wealth distribution. How high would you have to jump to make it into the 9.9 percent? In financial terms, the measurement is easy and the trend is unmistakable. In 1963, you would have needed to multiply your wealth six times. By 2016, you would have needed to leap twice as high -- increasing your wealth 12-fold -- to scrape into our group. If you boldly aspired to reach the middle of our group rather than its lower edge, you'd have needed to multiply your wealth by a factor of 25 . On this measure, the 2010s look much like the 1920s.

If you are starting at the median for people of color, you'll want to practice your financial pole-vaulting. The Institute for Policy Studies calculated that, setting aside money invested in "durable goods" such as furniture and a family car, the median black family had net wealth of $1,700 in 2013, and the median Latino family had $2,000, compared with $116,800 for the median white family. A 2015 study in Boston found that the wealth of the median white family there was $247,500, while the wealth of the median African American family was $8. That is not a typo. That's two grande cappuccinos. That and another 300,000 cups of coffee will get you into the 9.9 percent.

Video: America's Class Problem

https://www.youtube.com/embed/hb28kAavh0M?enablejsapi=1

N one of this matters, you will often hear, because in the United States everyone has an opportunity to make the leap: Mobility justifies inequality. As a matter of principle, this isn't true. In the United States, it also turns out not to be true as a factual matter. Contrary to popular myth, economic mobility in the land of opportunity is not high, and it's going down.

Imagine yourself on the socioeconomic ladder with one end of a rubber band around your ankle and the other around your parents' rung. The strength of the rubber determines how hard it is for you to escape the rung on which you were born. If your parents are high on the ladder, the band will pull you up should you fall; if they are low, it will drag you down when you start to rise. Economists represent this concept with a number they call "intergenerational earnings elasticity," or IGE, which measures how much of a child's deviation from average income can be accounted for by the parents' income. An IGE of zero means that there's no relationship at all between parents' income and that of their offspring. An IGE of one says that the destiny of a child is to end up right where she came into the world.

According to Miles Corak, an economics professor at the City University of New York, half a century ago IGE in America was less than 0.3 . Today, it is about 0.5. In America, the game is half over once you've selected your parents. IGE is now higher here than in almost every other developed economy. On this measure of economic mobility, the United States is more like Chile or Argentina than Japan or Germany.

The story becomes even more disconcerting when you see just where on the ladder the tightest rubber bands are located. Canada, for example, has an IGE of about half that of the U.S. Yet from the middle rungs of the two countries' income ladders, offspring move up or down through the nearby deciles at the same respectable pace. The difference is in what happens at the extremes. In the United States, it's the children of the bottom decile and, above all, the top decile -- the 9.9 percent -- who settle down nearest to their starting point. Here in the land of opportunity, the taller the tree, the closer the apple falls.

All of this analysis of wealth percentiles, to be clear, provides only a rough start in understanding America's evolving class system. People move in and out of wealth categories all the time without necessarily changing social class, and they may belong to a different class in their own eyes than they do in others'. Yet even if the trends in the monetary statistics are imperfect illustrations of a deeper process, they are nonetheless registering something of the extraordinary transformation that's taking place in our society.

A few years ago, Alan Krueger, an economist and a former chairman of the Obama administration's Council of Economic Advisers, was reviewing the international mobility data when he caught a glimpse of the fundamental process underlying our present moment . Rising immobility and rising inequality aren't like two pieces of driftwood that happen to have shown up on the beach at the same time, he noted. They wash up together on every shore. Across countries, the higher the inequality, the higher the IGE (see Figure 2). It's as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize.


The Great Gatsby Curve ( Figure 2 ): Inequality and class immobility go together.

Miles Corak

Economists are prudent creatures, and they'll look up from a graph like that and remind you that it shows only correlation, not causation. That's a convenient hedge for those of us at the top because it keeps alive one of the founding myths of America's meritocracy: that our success has nothing to do with other people's failure. It's a pleasant idea. But around the world and throughout history, the wealthy have advanced the crystallization process in a straightforward way. They have taken their money out of productive activities and put it into walls. Throughout history, moreover, one social group above all others has assumed responsibility for maintaining and defending these walls. Its members used to be called aristocrats. Now we're the 9.9 percent. The main difference is that we have figured out how to use the pretense of being part of the middle as one of our strategies for remaining on top.

Krueger liked the graph shown in Figure 2 so much that he decided to give it a name: the Great Gatsby Curve. It's a good choice, and it resonates strongly with me. F. Scott Fitzgerald's novel about the breakdown of the American dream is set in 1922, or right around the time that my great-grandfather was secretly siphoning money from Standard Oil and putting it into a shell company in Canada. It was published in 1925, just as special counsel was turning up evidence that bonds from that company had found their way into the hands of the secretary of the interior. Its author was drinking his way through the cafés of Paris just as Colonel Robert W. Stewart was running away from subpoenas to testify before the United States Senate about his role in the Teapot Dome scandal. We are only now closing in on the peak of inequality that his generation achieved, in 1928. I'm sure they thought it would go on forever, too.

3. The Origin of a Species

Money can't buy you class, or so my grandmother used to say. But it can buy a private detective. Grandmother was a Kentucky debutante and sometime fashion model (kind of like Daisy Buchanan in The Great Gatsby , weirdly enough), so she knew what to do when her eldest son announced his intention to marry a woman from Spain. A gumshoe promptly reported back that the prospective bride's family made a living selling newspapers on the streets of Barcelona. Grandmother instituted an immediate and total communications embargo. In fact, my mother's family owned and operated a large paper-goods factory. When children came, Grandmother at last relented. Determined to do the right thing, she arranged for the new family, then on military assignment in Hawaii, to be inscribed in the New York Social Register .

Sociologists would say, in their dry language, that my grandmother was a zealous manager of the family's social capital -- and she wasn't about to let some Spanish street urchin run away with it. She did have a point, even if her facts were wrong. Money may be the measure of wealth, but it is far from the only form of it. Family, friends, social networks, personal health, culture, education, and even location are all ways of being rich, too. These nonfinancial forms of wealth, as it turns out, aren't simply perks of membership in our aristocracy. They define us.

We are the people of good family, good health, good schools, good neighborhoods, and good jobs. We may want to call ourselves the "5Gs" rather than the 9.9 percent. We are so far from the not-so-good people on all of these dimensions, we are beginning to resemble a new species. And, just as in Grandmother's day, the process of speciation begins with a love story -- or, if you prefer, sexual selection.

The polite term for the process is assortative mating . The phrase is sometimes used to suggest that this is another of the wonders of the internet age, where popcorn at last meets butter and Yankees fan finds Yankees fan. In fact, the frenzy of assortative mating today results from a truth that would have been generally acknowledged by the heroines of any Jane Austen novel: Rising inequality decreases the number of suitably wealthy mates even as it increases the reward for finding one and the penalty for failing to do so. According to one study, the last time marriage partners sorted themselves by educational status as much as they do now was in the 1920s .

For most of us, the process is happily invisible. You meet someone under a tree on an exclusive campus or during orientation at a high-powered professional firm, and before you know it, you're twice as rich. But sometimes -- Grandmother understood this well -- extra measures are called for. That's where our new technology puts bumbling society detectives to shame. Ivy Leaguers looking to mate with their equals can apply to join a dating service called the League. It's selective, naturally: Only 20 to 30 percent of New York applicants get in. It's sometimes called "Tinder for the elites."


From Our June 2018 Issue

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It is misleading to think that assortative mating is symmetrical, as in city mouse marries city mouse and country mouse marries country mouse. A better summary of the data would be: Rich mouse finds love, and poor mouse gets screwed. It turns out -- who knew? -- that people who are struggling to keep it all together have a harder time hanging on to their partner. According to the Harvard political scientist Robert Putnam, 60 years ago just 20 percent of children born to parents with a high-school education or less lived in a single-parent household; now that figure is nearly 70 percent. Among college-educated households, by contrast, the single-parent rate remains less than 10 percent. Since the 1970s, the divorce rate has declined significantly among college-educated couples, while it has risen dramatically among couples with only a high-school education -- even as marriage itself has become less common. The rate of single parenting is in turn the single most significant predictor of social immobility across counties, according to a study led by the Stanford economist Raj Chetty.

None of which is to suggest that individuals are wrong to seek a suitable partner and make a beautiful family. People should -- and presumably always will -- pursue happiness in this way. It's one of the delusions of our meritocratic class, however, to assume that if our actions are individually blameless, then the sum of our actions will be good for society. We may have studied Shakespeare on the way to law school, but we have little sense for the tragic possibilities of life. The fact of the matter is that we have silently and collectively opted for inequality, and this is what inequality does. It turns marriage into a luxury good, and a stable family life into a privilege that the moneyed elite can pass along to their children. How do we think that's going to work out?

This divergence of families by class is just one part of a process that is creating two distinct forms of life in our society. Stop in at your local yoga studio or SoulCycle class, and you'll notice that the same process is now inscribing itself in our own bodies. In 19th-century England, the rich really were different. They didn't just have more money; they were taller -- a lot taller. According to a study colorfully titled "On English Pygmies and Giants," 16-year-old boys from the upper classes towered a remarkable 8.6 inches, on average, over their undernourished, lower-class countrymen. We are reproducing the same kind of division via a different set of dimensions.

Obesity, diabetes, heart disease, kidney disease, and liver disease are all two to three times more common in individuals who have a family income of less than $35,000 than in those who have a family income greater than $100,000. Among low-educated, middle-aged whites, the death rate in the United States -- alone in the developed world -- increased in the first decade and a half of the 21st century. Driving the trend is the rapid growth in what the Princeton economists Anne Case and Angus Deaton call "deaths of despair" -- suicides and alcohol- and drug-related deaths.

The sociological data are not remotely ambiguous on any aspect of this growing divide. We 9.9 percenters live in safer neighborhoods, go to better schools, have shorter commutes, receive higher-quality health care, and, when circumstances require, serve time in better prisons. We also have more friends -- the kind of friends who will introduce us to new clients or line up great internships for our kids.

These special forms of wealth offer the further advantages that they are both harder to emulate and safer to brag about than high income alone. Our class walks around in the jeans and T‑shirts inherited from our supposedly humble beginnings. We prefer to signal our status by talking about our organically nourished bodies, the awe-inspiring feats of our offspring, and the ecological correctness of our neighborhoods. We have figured out how to launder our money through higher virtues.

Most important of all, we have learned how to pass all of these advantages down to our children. In America today, the single best predictor of whether an individual will get married, stay married, pursue advanced education, live in a good neighborhood, have an extensive social network, and experience good health is the performance of his or her parents on those same metrics.

We're leaving the 90 percent and their offspring far behind in a cloud of debts and bad life choices that they somehow can't stop themselves from making. We tend to overlook the fact that parenting is more expensive and motherhood more hazardous in the United States than in any other developed country, that campaigns against family planning and reproductive rights are an assault on the families of the bottom 90 percent, and that law-and-order politics serves to keep even more of them down. We prefer to interpret their relative poverty as vice: Why can't they get their act together?

New forms of life necessarily give rise to new and distinct forms of consciousness. If you doubt this, you clearly haven't been reading the "personal and household services" ads on Monster.com. At the time of this writing, the section for my town of Brookline, Massachusetts, featured one placed by a "busy professional couple" seeking a "Part Time Nanny." The nanny (or manny -- the ad scrupulously avoids committing to gender) is to be "bright, loving, and energetic"; "friendly, intelligent, and professional"; and "a very good communicator, both written and verbal." She (on balance of probability) will "assist with the care and development" of two children and will be "responsible for all aspects of the children's needs," including bathing, dressing, feeding, and taking the young things to and from school and activities. That's why a "college degree in early childhood education" is "a plus."

In short, Nanny is to have every attribute one would want in a terrific, professional, college-educated parent. Except, of course, the part about being an actual professional, college-educated parent. There is no chance that Nanny will trade places with our busy 5G couple. She "must know the proper etiquette in a professionally run household" and be prepared to "accommodate changing circumstances." She is required to have "5+ years experience as a Nanny," which makes it unlikely that she'll have had time to get the law degree that would put her on the other side of the bargain. All of Nanny's skills, education, experience, and professionalism will land her a job that is "Part Time."

The ad is written in flawless, 21st-century business-speak, but what it is really seeking is a governess -- that exquisitely contradictory figure in Victorian literature who is both indistinguishable in all outward respects from the upper class and yet emphatically not a member of it. Nanny's best bet for moving up in the world is probably to follow the example of Jane Eyre and run off with the lord (or lady) of the manor.

If you look beyond the characters in this unwritten novel about Nanny and her 5G masters, you'll see a familiar shape looming on the horizon. The Gatsby Curve has managed to reproduce itself in social, physiological, and cultural capital. Put more accurately: There is only one curve, but it operates through a multiplicity of forms of wealth.

Rising inequality does not follow from a hidden law of economics, as the otherwise insightful Thomas Piketty suggested when he claimed that the historical rate of return on capital exceeds the historical rate of growth in the economy. Inequality necessarily entrenches itself through other, nonfinancial, intrinsically invidious forms of wealth and power. We use these other forms of capital to project our advantages into life itself. We look down from our higher virtues in the same way the English upper class looked down from its taller bodies, as if the distinction between superior and inferior were an artifact of nature. That's what aristocrats do.

... ... ...

5. The Invisible Hand of Government

As far as Grandfather was concerned, the assault on the productive classes began long before the New Deal. It all started in 1913, with the ratification of the Sixteenth Amendment. In case you've forgotten, that amendment granted the federal government the power to levy a direct personal-income tax. It also happens that ratification took place just a few months after Grandfather was born, which made sense to me in a strange way. By far the largest part of his lifetime income was attributable to his birth.

Grandfather was a stockbroker for a time. I eventually figured out that he mostly traded his own portfolio and bought a seat at the stock exchange for the purpose. Politics was a hobby, too. At one point, he announced his intention to seek the Republican nomination for lieutenant governor of Connecticut. (It wasn't clear whether anybody outside the clubhouse heard him.) What he really liked to do was fly. The memories that mattered most to him were his years of service as a transport pilot during World War II. Or the time he and Grandmother took to the Midwestern skies in a barnstorming plane. My grandparents never lost faith in the limitless possibilities of a life free from government. But in their last years, as the reserves passed down from the Colonel ran low, they became pretty diligent about collecting their Social Security and Medicare benefits.

There is a page in the book of American political thought -- Grandfather knew it by heart -- that says we must choose between government and freedom. But if you read it twice, you'll see that what it really offers is a choice between government you can see and government you can't. Aristocrats always prefer the invisible kind of government. It leaves them free to exercise their privileges. We in the 9.9 percent have mastered the art of getting the government to work for us even while complaining loudly that it's working for those other people.

Consider, for starters, the greatly exaggerated reports of our tax burdens. On guest panels this past holiday season, apologists for the latest round of upwardly aimed tax cuts offered versions of Mitt Romney's claim that the 47 percent of Americans who pay no federal income tax in a typical year have "no skin in the game." Baloney. Sure, the federal individual-income tax, which raised $1.6 trillion last year, remains progressive. But the $1.2 trillion raised by the payroll tax hits all workers -- but not investors, such as Romney -- and it hits those making lower incomes at a higher rate, thanks to a cap on the amount of income subject to the tax. Then there's the $2.3 trillion raised by state and local governments, much of it collected through regressive sales and property taxes. The poorest quintile of Americans pays more than twice the rate of state taxes as the top 1 percent does , and about half again what the top 10 percent pays.

Our false protests about paying all the taxes, however, sound like songs of innocence compared with our mastery of the art of having the taxes returned to us. The income-tax system that so offended my grandfather has had the unintended effect of creating a highly discreet category of government expenditures. They're called "tax breaks," but it's better to think of them as handouts that spare the government the inconvenience of collecting the money in the first place. In theory, tax expenditures can be used to support any number of worthy social purposes, and a few of them, such as the earned income-tax credit, do actually go to those with a lower income. But more commonly, because their value is usually a function of the amount of money individuals have in the first place, and those individuals' marginal tax rates, the benefits flow uphill.

Let us count our blessings: Every year, the federal government doles out tax expenditures through deductions for retirement savings (worth $137 billion in 2013); employer-sponsored health plans ($250 billion); mortgage-interest payments ($70 billion); and, sweetest of all, income from watching the value of your home, stock portfolio, and private-equity partnerships grow ($161 billion). In total, federal tax expenditures exceeded $900 billion in 2013. That's more than the cost of Medicare, more than the cost of Medicaid, more than the cost of all other federal safety-net programs put together. And -- such is the beauty of the system -- 51 percent of those handouts went to the top quintile of earners, and 39 percent to the top decile.

The best thing about this program of reverse taxation, as far as the 9.9 percent are concerned, is that the bottom 90 percent haven't got a clue. The working classes get riled up when they see someone at the grocery store flipping out their food stamps to buy a T-bone. They have no idea that a nice family on the other side of town is walking away with $100,000 for flipping their house.

But wait, there's more! Let's not forget about the kids. If the secrets of a nation's soul may be read from its tax code, then our nation must be in love with the children of rich people. The 2017 tax law raises the amount of money that married couples can pass along to their heirs tax-free from a very generous $11 million to a magnificent $22 million. Correction: It's not merely tax-free; it's tax-subsidized. The unrealized tax liability on the appreciation of the house you bought 40 years ago, or on the stock portfolio that has been gathering moths -- all of that disappears when you pass the gains along to the kids. Those foregone taxes cost the United States Treasury $43 billion in 2013 alone -- about three times the amount spent on the Children's Health Insurance Program.

Grandfather's father, the Colonel, died in 1947, when the maximum estate-tax rate was a now-unheard-of 77 percent. When the remainder was divvied up among four siblings, Grandfather had barely enough to pay for the Bentley and keep up with dues at the necessary clubs. The government made sure that I would grow up in the middle class. And for that I will always be grateful.

... ... ...

8. The Politics of Resentment

The political theology of the meritocracy has no room for resentment. We are taught to run the competition of life with our eyes on the clock and not on one another, as if we were each alone. If someone scores a powerboat on the Long Island waterways, so much the better for her. The losers will just smile and try harder next time.

In the real world, we humans are always looking from side to side. We are intensely conscious of what other people are thinking and doing, and conscious to the point of preoccupation with what they think about us. Our status is visible only through its reflection in the eyes of others.

Perhaps the best evidence for the power of an aristocracy is to be found in the degree of resentment it provokes. By that measure, the 9.9 percent are doing pretty well indeed. The surest sign of an increase in resentment is a rise in political division and instability. We're positively acing that test. You can read all about it in the headlines of the past two years.

The 2016 presidential election marked a decisive moment in the history of resentment in the United States. In the person of Donald Trump, resentment entered the White House. It rode in on the back of an alliance between a tiny subset of super-wealthy 0.1 percenters (not all of them necessarily American) and a large number of 90 percenters who stand for pretty much everything the 9.9 percent are not.

According to exit polls by CNN and Pew, Trump won white voters by about 20 percent. But these weren't just any old whites (though they were old, too). The first thing to know about the substantial majority of them is that they weren't the winners in the new economy. To be sure, for the most part they weren't poor either. But they did have reason to feel judged by the market -- and found wanting. The counties that supported Hillary Clinton represented an astonishing 64 percent of the GDP, while Trump counties accounted for a mere 36 percent. Aaron Terrazas, a senior economist at Zillow, found that the median home value in Clinton counties was $250,000, while the median in Trump counties was $154,000. When you adjust for inflation, Clinton counties enjoyed real-estate price appreciation of 27 percent from January 2000 to October 2016; Trump counties got only a 6 percent bump.

The residents of Trump country were also the losers in the war on human health. According to Shannon Monnat, an associate professor of sociology at Syracuse, the Rust Belt counties that put the anti-government-health-care candidate over the top were those that lost the most people in recent years to deaths of despair -- those due to alcohol, drugs, and suicide. To make all of America as great as Trump country, you would have to torch about a quarter of total GDP, wipe a similar proportion of the nation's housing stock into the sea, and lose a few years in life expectancy. There's a reason why one of Trump's favorite words is unfair . That's the only word resentment wants to hear.

Even so, the distinguishing feature of Trump's (white) voters wasn't their income but their education, or lack thereof. Pew's latest analysis indicates that Trump lost college-educated white voters by a humiliating 17 percent margin. But he got revenge with non-college-educated whites, whom he captured by a stomping 36 percent margin. According to an analysis by Nate Silver, the 50 most educated counties in the nation surged to Clinton : In 2012, Obama had won them by a mere 17 percentage points; Clinton took them by 26 points. The 50 least educated counties moved in the opposite direction; whereas Obama had lost them by 19 points, Clinton lost them by 31. Majority-minority counties split the same way: The more educated moved toward Clinton, and the less educated toward Trump.

The historian Richard Hofstadter drew attention to Anti-intellectualism in American Life in 1963; Susan Jacoby warned in 2008 about The Age of American Unreason ; and Tom Nichols announced The Death of Expertise in 2017. In Trump, the age of unreason has at last found its hero. The "self-made man" is always the idol of those who aren't quite making it. He is the sacred embodiment of the American dream, the guy who answers to nobody, the poor man's idea of a rich man. It's the educated phonies this group can't stand. With his utter lack of policy knowledge and belligerent commitment to maintaining his ignorance, Trump is the perfect representative for a population whose idea of good governance is just to scramble the eggheads. When reason becomes the enemy of the common man, the common man becomes the enemy of reason.

Did I mention that the common man is white? That brings us to the other side of American-style resentment. You kick down, and then you close ranks around an imaginary tribe. The problem, you say, is the moochers, the snakes, the handout queens; the solution is the flag and the religion of your (white) ancestors. According to a survey by the political scientist Brian Schaffner, Trump crushed it among voters who "strongly disagree" that "white people have advantages because of the color of their skin," as well as among those who "strongly agree" that "women seek to gain power over men." It's worth adding that these responses measure not racism or sexism directly, but rather resentment. They're good for picking out the kind of people who will vehemently insist that they are the least racist or sexist person you have ever met, even as they vote for a flagrant racist and an accused sexual predator.

No one is born resentful. As mass phenomena, racism, xenophobia, anti-intellectualism, narcissism, irrationalism, and all other variants of resentment are as expensive to produce as they are deadly to democratic politics. Only long hours of television programming, intelligently manipulated social-media feeds, and expensively sustained information bubbles can actualize the unhappy dispositions of humanity to the point where they may be fruitfully manipulated for political gain. Racism in particular is not just a legacy of the past, as many Americans would like to believe; it also must be constantly reinvented for the present. Mass incarceration, fearmongering, and segregation are not just the results of prejudice, but also the means of reproducing it.

The raging polarization of American political life is not the consequence of bad manners or a lack of mutual understanding. It is just the loud aftermath of escalating inequality. It could not have happened without the 0.1 percent (or, rather, an aggressive subset of its members). Wealth always preserves itself by dividing the opposition. The Gatsby Curve does not merely cause barriers to be built on the ground; it mandates the construction of walls that run through other people's minds.

But that is not to let the 9.9 percent off the hook. We may not be the ones funding the race-baiting, but we are the ones hoarding the opportunities of daily life. We are the staff that runs the machine that funnels resources from the 90 percent to the 0.1 percent. We've been happy to take our cut of the spoils. We've looked on with smug disdain as our labors have brought forth a population prone to resentment and ripe for manipulation. We should be prepared to embrace the consequences.

The first important thing to know about these consequences is the most obvious: Resentment is a solution to nothing. It isn't a program of reform. It isn't "populism." It is an affliction of democracy, not an instance of it. The politics of resentment is a means of increasing inequality, not reducing it. Every policy change that has waded out of the Trump administration's baffling morass of incompetence makes this clear. The new tax law; the executive actions on the environment and telecommunications, and on financial-services regulation; the judicial appointments of conservative ideologues -- all will have the effect of keeping the 90 percent toiling in the foothills of merit for many years to come.

The second thing to know is that we are next in line for the chopping block. As the population of the resentful expands, the circle of joy near the top gets smaller. The people riding popular rage to glory eventually realize that we are less useful to them as servants of the economic machine than we are as model enemies of the people. The anti-blue-state provisions of the recent tax law have miffed some members of the 9.9 percent, but they're just a taste of the bad things that happen to people like us as the politics of resentment unfolds.

The past year provides ample confirmation of the third and most important consequence of the process: instability. Unreasonable people also tend to be ungovernable. I won't belabor the point. Just try doing a frequency search on the phrase constitutional crisis over the past five years. That's the thing about the Gatsby Curve. You think it's locking all of your gains in place. But the crystallization process actually has the effect of making the whole system more brittle. If you look again at history, you can get a sense of how the process usually ends.

10. The Choice

I like to think that the ending of The Great Gatsby is too down-beat. Even if we are doomed to row our boats ceaselessly back into the past, how do we know which part of the past that will be?

History shows us a number of aristocracies that have made good choices. The 9.9 percenters of ancient Athens held off the dead tide of the Gatsby Curve for a time, even if democracy wasn't quite the right word for their system of government. America's first generation of revolutionaries was mostly 9.9 percenters, and yet they turned their backs on the man at the very top in order to create a government of, by, and for the people. The best revolutions do not start at the bottom; they are the work of the upper-middle class.

These exceptions are rare, to be sure, and yet they are the story of the modern world. In total population, average life expectancy, material wealth, artistic expression, rates of violence, and almost every other measure that matters for the quality of human life, the modern world is a dramatically different place than anything that came before. Historians offer many complicated explanations for this happy turn in human events -- the steam engine, microbes, the weather -- but a simple answer precedes them all: equality. The history of the modern world is the unfolding of the idea at the vital center of the American Revolution.

The defining challenge of our time is to renew the promise of American democracy by reversing the calcifying effects of accelerating inequality. As long as inequality rules, reason will be absent from our politics; without reason, none of our other issues can be solved. It's a world-historical problem. But the solutions that have been put forward so far are, for the most part, shoebox in size.

Well-meaning meritocrats have proposed new and better tests for admitting people into their jewel-encrusted classrooms. Fine -- but we aren't going to beat back the Gatsby Curve by tweaking the formulas for excluding people from fancy universities. Policy wonks have taken aim at the more-egregious tax-code handouts, such as the mortgage-interest deduction and college-savings plans. Good -- and then what? Conservatives continue to recycle the characterological solutions, like celebrating traditional marriage or bringing back that old-time religion. Sure -- reforging familial and community bonds is a worthy goal. But talking up those virtues won't save any families from the withering pressures of a rigged economy. Meanwhile, coffee-shop radicals say they want a revolution. They don't seem to appreciate that the only simple solutions are the incredibly violent and destructive ones.

The American idea has always been a guide star, not a policy program, much less a reality. The rights of human beings never have been and never could be permanently established in a handful of phrases or old declarations. They are always rushing to catch up to the world that we inhabit. In our world, now, we need to understand that access to the means of sustaining good health, the opportunity to learn from the wisdom accumulated in our culture, and the expectation that one may do so in a decent home and neighborhood are not privileges to be reserved for the few who have learned to game the system. They are rights that follow from the same source as those that an earlier generation called life, liberty, and the pursuit of happiness.


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Yes, the kind of change that really matters is going to require action from the federal government. That which creates monopoly power can also destroy it; that which allows money into politics can also take it out; that which has transferred power from labor to capital can transfer it back. Change also needs to happen at the state and local levels. How else are we going to open up our neighborhoods and restore the public character of education?

It's going to take something from each of us, too, and perhaps especially from those who happen to be the momentary winners of this cycle in the game. We need to peel our eyes away from the mirror of our own success and think about what we can do in our everyday lives for the people who aren't our neighbors. We should be fighting for opportunities for other people's children as if the future of our own children depended on it. It probably does.


This article appears in the June 2018 print edition with the headline "The Birth of a New American Aristocracy."

[Jun 06, 2018] What is the "optimum" level of inequality in the society?

Jun 06, 2018 | discussion.theguardian.com

Janeee -> Jas636 , 3 Jun 2018 21:52

There are many societies that tolerate a certain degree of economic inequality, but still provide decent living conditions, services and infrastructure for most citizens. The notion that we either have extreme inequality or extreme poverty is empirically and morally empty.

[Jun 05, 2018] "'Greater education and the need for more workers to receive it are not adequate explanations of inequality

Jun 05, 2018 | twitter.com

The decline in union density is.' @LipstickEcon on new research that links declining unionization to rising #inequality, via @Slate https://slate.com/human-interest/2018/05/study-unions-increasingly-represent-educated-workers.html #EGgrantee..."

[May 16, 2018] How university economic theories are failing us all RT -- Renegade Inc.

Notable quotes:
"... "When the facts change, I change my mind. What do you do, sir?" ..."
May 14, 2018 | www.rt.com

The economist John Maynard Keynes said "When the facts change, I change my mind. What do you do, sir?" But many students continue to be deceived by their professors who, even after the great financial crisis, refuse to change their mind and continue to actively peddle theories that are plain wrong. So on the show we ask if the academics are failing us, how do we begin to reverse such a heavily entrenched education system? Host Ross Ashcroft is joined by Professor Steve Keen and the author and economist Steven Payson.

[Apr 24, 2018] How neoliberal economics in universities achieve tenure

They achieve it by serving the financial oligarchy...
Few things are as dangerous as economists with physics envy [aeon.co].
Notable quotes:
"... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning. ..."
Apr 24, 2018 | www.nakedcapitalism.com

marku52 , April 20, 2018 at 3:57 pm

Stumbling and Mumbling has a good riff on this topic:
". Economics, for me, is not about armchair theorizing. It should begin with the facts, and especially the big ones. The facts are that share buy-backs do usually matter, so thought experiments that say otherwise are wrong from the off. Similarly, the fact that wage inflation has been low for years (pdf) is much more significant than any theorizing about Phillips curves."

The comments are good as well:
"That's a category error: you don't define "Economics", tenure committees define it, and they award tenure to people who have a long record of publishing "internally consistent" ("armchair theorizing") papers."
"I found myself sitting next to a very likable young middle-aged academic tenured at an elite British university, whom henceforth I will refer to as Doctor X and whose field is closely associated with this blog. Every year I publish papers in the top journals and they're pure shit." Doctor X, who by now had had a glass or two, felt bad about this, not least because "students these days are so idealistic and eager to learn; they're really wonderful." Furthermore Doctor X could and would like "to write serious papers but what would be the point?" "
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2018/04/facts-vs-hand-waving-in-economics.html#comments

hemeantwell , April 20, 2018 at 4:59 pm

Yeah. I'm inclined to think the author needs to curb his enthusiasms and take up dejected drinking.

The nub of his presentation was a model in which consumers, due to cognitive limitations, were unable to fully examine every single product they purchased. The result was that regulations guaranteeing a certain standard of safety, quality and the like could improve competition by giving people more time to shop around instead of having to devote so much time to investigate specific products. Thus, regulation would improve markets and competition

This is Nobel-level work? It amounts to finding a way to pitch a product to anti-regulation dogmatists. I'm sure that you could find similar arguments being made during the Progressive era regulatory push. Only they would have been framed more as "people will have more time to shop around if they're not killed by previous ingestion of the product."

Ape , April 22, 2018 at 3:32 am

Dude – they aren't actually doing fancy math. Linear regression – like it's 1850!

Most of their important proofs are irrelevant crap with wholes. The math is mostly undergraduate math! The emperor has no clothes!

The problem isn't just math trickery – it's not even proper ingenuity.

Just read a Summer or Krugman paper – it's 70 pages of words, 3 graphs of imaginary numbers and stats 2 equations. That's not mathematization.

Larry Motuz , April 22, 2018 at 4:34 pm

What I mean by 'mathemagics' is the misuse of mathematics –even simple mathematics -- to create the illusion that 'utility' or 'indifference curves' actually pertain to real concepts. In reality, they 'mathematize' gobbledygook passed off as coherent concepts. There is nothing so conceptually barren as 'utility' or 'indifference curve' analytics. The notion that one can derive any coherent 'demand' analysis for any one consumer that is individual human being (or life form of any kind) for any product, or that one can aggregate these up is mathematical junk.

Sound of the Suburbs , April 22, 2018 at 9:08 am

The Classical Economists used the broader political economy rather than today's narrow economics.

The Washington Consensus dreamed of a world run by the laws of economics.

The laws of economics worked in China's favour and the Western economies got hollowed out.

Disposable income = wages – (taxes + the cost of living)

Maximising profit required minimising wages.

The minimum wage is set when disposable income equals zero.

The minimum wage = taxes + the cost of living

China had it made and the West had tilted the playing field against itself.

The US eventually woke up the geopolitical consequences of a world governed by the laws of economics that had worked in China's favour.

Trump has just made things worse with his tax cuts.

Theory:
If we reduce taxes on the wealthy they will create more jobs and wages.

Reality:
If we reduce taxes on the wealthy they will create more jobs and wages in Asia where they can make more profit. They can then ship the stuff back here increasing Western trade deficits.

Sound of the Suburbs , April 22, 2018 at 9:09 am

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning. " Warren Buffet, 25 May 2005

Did your class think about the geopolitics?
I don't think so.

Sound of the Suburbs , April 22, 2018 at 9:17 am

William White (BIS, OECD) is on board for the benefits of the broader political economy.

https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s

[Apr 24, 2018] Neoliberal indoctrination at universities

Notable quotes:
"... First, we need to accept that there is no such thing as "value-free" analysis of the economy. As I've explained, neoclassical economics pretends to be ethically neutral while smuggling in an individualistic, anti-social ethos " – Howard Reed ..."
"... Fundamentally, economics is a religion, with priests, high priests, creed, dogma, punishment for heretics, and all the other trappings of a religion. But the pay is good, so Clive's rule for middle class jobs applies. ..."
"... Fooled by Randomness ..."
Apr 24, 2018 | www.nakedcapitalism.com

Economics conducted a curriculum review of 174 modules at 7 Russell Group universities -- rightly or wrongly considered the 'top' universities in the UK -- and we found that the uncritical acceptance of one type of economics begins with education. Under 10% of modules even mentioned anything other than mainstream or 'neoclassical' economics; in econometrics, over 90% of modules devoted more than two-thirds of their lectures to linear regression. Only 24% of exam questions required critical or independent thinking (i.e. were open-ended); this dropped to 8% if you only counted the compulsory macro and micro modules that form the core of economics education.

We have previously called this 'indoctrination', and while this may seem dramatic the dictionary definition of indoctrination is to "teach a person or set of people to accept a set of beliefs uncritically", which we think adequately characterises the results of the review, as well as our own experience and many widely used economics textbooks. Given this education, it is no wonder that economists remain wedded to the fundamental precepts of choice models and linear regression no matter where they turn their attention. By putting the method first, the implicit assumption becomes that answering a question using this framework is prima facie interesting, and critical evaluation of these tools against others is made unthinkable.


Jim Haygood , , April 20, 2018 at 11:01 am

For nearly thirty years after the Efficient Market Hypothesis (EMH) became received gospel in the mid-1960s, the claim that stock prices exhibited momentum (which shouldn't be true in a perfectly efficient market) was roundly mocked by mainstream economists.

Then in 1993, Jegadeesh and Titman published a paper titled "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency" in the Journal of Finance . Its evidence for a momentum effect was impossible to refute.

So economists bolted en masse to the opposite side of the boat. Today there are thousands of papers on momentum, often presenting some fairly trivial arithmetic that home-based amateurs have long used. But it's formulated into equations with Greek letters, and a [totally boring] statistical panel appears in the Appendix to prove some statistical significance.

A few professors actually exploited their discoveries to get rich. Cliff Asness, a U of Chicago PhD (but a practitioner, not a professor) offers some light-hearted commentary on his mentor Eugene Fama:

Of course the book The Fama Portfolio also contains contributions by other authors (or how the heck did I get in there?) that reflect, directly or indirectly, on Gene's work.

Being able to read Gene's originals and some of the major papers by others that explore his work in one volume is both a treat and incredibly useful (these contributors, unlike John Liew and myself, are themselves serious academic luminaries!).

OK, enough shilling. If you love finance and don't immediately pine for this book, I can't help you any further☺

https://www.aqr.com/Insights/Perspectives/Add-More-Fama-to-Your-Portfolio

skippy , April 20, 2018 at 3:47 pm

Mr. Haygood

If it was only like the movie THX1138.

Where the police were call off their pursuit, when within a finger nail of – helping – their subject. Because the economic perimeters their models produced, with the help of computational machines, gave a ridged defined view of the operation. Seems the subject was operating outside the econometric perimeters due to mental illness – was a patient whom escaped at the time.

Alas we never get to see what he saw when he popped out on the surface, save a blinding orb.

In retrospect did they do the underground thingy to better control, could nature itself be a threat to the model, hence the need to control every aspect of environment for behavioral reasons.

Anywho I'll just leave this on my way to work:

"If we accept that we need fundamental reform, what should the new economics -- "de-conomics" as I'm calling it -- look like?

First, we need to accept that there is no such thing as "value-free" analysis of the economy. As I've explained, neoclassical economics pretends to be ethically neutral while smuggling in an individualistic, anti-social ethos " – Howard Reed

https://www.prospectmagazine.co.uk/magazine/the-case-for-a-new-economics

Synoia , April 20, 2018 at 11:33 am

Linear regression is economists' preferred empirical technique

That's really a powerful tool in a world which is chaotic.

The trouble with embracing chaos and catastrophe theory is the "chaos" part of predicting the future. But economists, being human and liking their paychecks, are not interested in any predictions which do not cater, or pander, to the needs of their bosses or paymasters.

Why, that might suggest the boss is wrong! Such heresy leads to a quick execution!

Fundamentally, economics is a religion, with priests, high priests, creed, dogma, punishment for heretics, and all the other trappings of a religion. But the pay is good, so Clive's rule for middle class jobs applies.

Disclaimer: My view of Religion is similar: Why?
1. You'll get your reward in the afterlife, after you are dead!
2. We know this is true, because we've never had a complaint.

Chris , April 20, 2018 at 12:22 pm

Linear regression certainly is a powerful tool for examining linear distributions, but it essential to first confirm that the distribution is linear, and to remember that on occasion, samples drawn from random (unrelated) distributions can show a spurious correlation.

Synoia , April 20, 2018 at 1:53 pm

but it essential to first confirm that the distribution is linear

Very true, but how is this proven? In nature and economics are there any linear distributions? If so over what range?

I notice a preponderance of using straight lines instead of growth curves. I also notice chaos, or noise, in behaviors, coupled with a complete non-understanding of entropy.

In nature linear behavior is unlikely. If it were linear we'd see straight branches on trees, rainfall evenly distributed and the wind would always blow at constant speed, with predictable eddies.

I suppose a rock dropped would exhibit linear behaviors until it hits the ground, and at that point in time the "dropping rock" system become decidedly chaotic, from stuck in the mud, to bouncing in a random direction, to bursting into pieces, pieces who's destiny is completely uncertain.

blennylips , April 20, 2018 at 2:40 pm

― Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder

I've debated many economists who claim to specialize in risk and probability: when one takes them slightly outside their narrow focus, but within the discipline of probability, they fall apart, with the disconsolate face of a gym rat in front of a gangster hit man."

Nassim, I think covers all this better than anyone else. Would love to hear of similarly comprehensive works.

https://www.penguinrandomhouse.com/series/INO/incerto

Fooled by Randomness covers problems with assumed linearity and normal distributions.

[Apr 07, 2018] Richest one percent will own two-thirds of all wealth by 2030 by Michael Savage

Neoliberalism as a social system is self-destructive -- similar to Trotskyism from which it was derived.
World leaders urged to act as anger over inequality reaches a 'tipping point'
Typical neoliberal mantra "need to rise productivity" is a typical neoliberal fake: look at Amazon for shining example here.
Notable quotes:
"... The real focus of our taxation system should be to tax wealth and recipients of silly amounts of annual income. ..."
"... Ur talking about something called "Reagan-nomics" or what was commonly and lovingly referred to as "trickle down economics". After the destruction of unionized labor, years of globalization, record profits for corporations & wall street and a high octane doze of Reagan / Thatcher Neoliberalism, "trickle down" has obviously been a complete failure. ..."
Apr 07, 2018 | www.theguardian.com

An alarming projection produced by the House of Commons library suggests that if trends seen since the 2008 financial crash were to continue, then the top 1% will hold 64% of the world's wealth by 2030. Even taking the financial crash into account, and measuring their assets over a longer period, they would still hold more than half of all wealth.

Since 2008, the wealth of the richest 1% has been growing at an average of 6% a year – much faster than the 3% growth in wealth of the remaining 99% of the world's population. Should that continue, the top 1% would hold wealth equating to $305tn (£216.5tn) – up from $140tn today.


BrianSand , 7 Apr 2018 14:53

The population of third world countries is skyrocketing. The population of developed countries, outside the importation of poor immigrants, is static. The top 1% of world population will continuously become comparatively richer as long as this is the case.
feliciafarrel -> apaliteno , 7 Apr 2018 14:50

but there's no way the UK has 10 million of the world's richest 75 million.

You need £550,000 to be in the top 1% in the world.

In the UK there are 27m households with an average of 1.94 adults per household.

25% of households have £550,000 or more.

That means 6.75m households are in the top 1% of the world, At 1.94 adults per household, that's 13,000,000 people.

However, assuming households are not 'legal people' but the adults within them are, then you'd have to divide household income by the number of adults (1.94) to get the wealth per person. So to reach £550,000 per person, a household would have to have net wealth of £1.067m, and only 10% of households have that wealth.

10% of 27m is 2.7m and that equates to only 5,240,000 people.

So in terms of households we easily reach 10m mark, but in terms of individual people, you are correct, it is 'only' 5.24m. Still and awful lot of people though.

Landlord52 -> Whattayagonnado huh , 7 Apr 2018 14:46
A single mother get £20k on benefits per years. Over 18 years that is £360,000. She has two kids, so that iwill cost £3,000 in education per years. 2 kids x 14 years x £3,500 per years = £98,000. We pay for child birth costs, free vaccinations, anti-natal care, free prescriptions, free eye care, free dental care, free school meals, we pay her countal tax bil. Plus if she is lucky, she get a free £450,000 council home.

Even if she works for a few years, it will never be enough to pay what she has received from the state. PLus we have to make provisions for her pension and her elderly care, meals on wheels, elderly health care etc...

That is easily £1m to £2million per single mother....

yeah... we are such a terrible society....

PotholeKid -> counttrumpage , 7 Apr 2018 14:45
The plebs are well on the way to figuring it out alright and so have the 1%. That's we now live under a militarized surveillance state which serves the elites.. Think again if voting will ever change this.. Bernie was doomed from the getgo.
hundredhander , 7 Apr 2018 14:42
I think the principle here is that the longer this goes on and the greater inequality becomes then the more extreme will be the countervailing force.

It is in everybody's interest that the world becomes fairer. That governments govern in the interests of as many people as possible. That public services like health and education are available to all regardless. That taxes are progressive and that governments have international treaties to deal with tax avoidance and evasion. That our democratic processes are as robust as possible and that all our organs of state are as transparent as possible and open to scrutiny to the public.

If the accumulation of wealth on this scale continues unabated it will end in tears... inevitably.

Furthermore I believe that there is a relationship between inequality - and all the things that go with it and follow from it - and environmental degradation.

Greater fairness between individuals and between countries is, in my opinion, one of the essential requirements for us to surmount the epic problems that we face in the world today.

DogsLivesMatter , 7 Apr 2018 14:41
I think most of us have are aware of what really happens at Davos. The wealthy and powerful are cooking up more schemes to screw the 99% over. Your Bono's and your Bill Gates are no friends to the working class or the working poor. Take Jeff Bezos for example. He has a mass of wealth totaling $112 Billion.

Jeff Bezos, or even Bill Gates could do that in an instant and still have Billions to spare. The super rich don't care about "regular" people, and never have.


Peter Rabbit ComfortablyPlumb 7 Apr 2018 14:25

This is the Osborne analogy regurgitated.

If you live in a £2.5 million house, you are wealthy, not average or poor. To be wealthy is not some form of human rights entitlement, especially if it is at the cost of the overwhelming majority. This concept is known as "greed" and "selfishness". Obviously your mantra is that of Gordon Gekko "greed is good".

The real focus of our taxation system should be to tax wealth and recipients of silly amounts of annual income.

All these arguments are dated and are applicable to the Thatcher era of the early 1980s which has long gone and is not going to return. The problem facing our society currently is run away social and economic inequality and the entrenchment of substantial wealth for a very small number of people which is fuelling generational social and inequality.


TakoradiMan BrotherLead 7 Apr 2018 14:24

I presume that most those living in the U.K. will fall within top 1% which the Guardianista loath so much.

I'm sorry but this post is utterly clueless.

To be in the top 1% you need to have a household income of well over £50k per annum (closer to £100k I suspect - no one here has yet given very authoritative figures); only a fraction of the UK population are that well off.

AnneK1 Landlord52 7 Apr 2018 14:24

Except that they don't and the charities have to come along and ask us for more money because the public sector haven't used tax revenue efficiently. I would say Britain's ineffective public sector are the greatest threat to Corbyn's chances of forming the government we need to rid us of these dangerous Tories.

PeterlooSunset 7 Apr 2018 14:24

The richest 1% own the corporate media (including the private equity firms keeping the Guardian afloat) that keep telling us we have to focus our attention on identity politics while they loot all the wealth.


prematureoptimsim -> Inthesticks 7 Apr 2018 14:23

Ur talking about something called "Reagan-nomics" or what was commonly and lovingly referred to as "trickle down economics". After the destruction of unionized labor, years of globalization, record profits for corporations & wall street and a high octane doze of Reagan / Thatcher Neoliberalism, "trickle down" has obviously been a complete failure.

U need proof ? Just examine recent history of presidential elections. . . .

  1. Barack Obama - ( Mr. Hope and Change )
  2. Donald Trump - ( Mr. Make America Great Again ).

And in the end it's the same as it ever was. The rich get richer and. . . . Well u know the rest. Good luck to u. Enjoy ur crumbs.

[Apr 04, 2018] Elite universities are selling themselves – and look who s buying by Grif Peterson and Yarden Katz

Notable quotes:
"... Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace". ..."
Mar 30, 2018 | www.theguardian.com

Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace".

This market rationality extends even to the way research is evaluated – which the Saudi government has been gaming. To give one example, it paid highly cited mathematicians at universities around the world to list King Abdulaziz University as an affiliation, thereby making it the seventh "best" mathematics department worldwide in the 2014 US News and World Report university rankings .

Here, the Saudi government is only playing by the rules of a game designed by western elites. This is the same logic that has been used to allow corporations, nonprofits and the military to steadily buy out chunks of academia to the point where it makes little sense to presume clear boundaries exist between these entities. As a result, numerous partnerships entangle MIT researchers with Bin Salman. On his Boston tour, he also visited IBM's Cambridge research facility, which recently partnered with MIT to form an artificial intelligence research laboratory in exchange for a $240m commitment to the university. Boston Dynamics , an MIT partner that builds robots for the US military, also offered a demonstration. Such alliances ought to cast doubt on MIT's promise to understand the "societal and ethical" implications of AI and build socially beneficial technologies.

The terms of all of these partnerships are essentially opaque, while the secrecy that surrounds them denies the community the chance to deliberate and take action. The growth of unaccountable university partnerships, like other crises facing educational institutions, stems from the absence of democratic engagement. When universities decide to sell themselves to the highest bidder, they become deaf to the interests of their students and the wider societies in which they operate. Subservience to war criminals and corporate overlords tends to follow.

[Apr 04, 2018] Elite universities are selling themselves and look who's buying

Apr 04, 2018 | www.theguardian.com

Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace".

This market rationality extends even to the way research is evaluated – which the Saudi government has been gaming. To give one example, it paid highly cited mathematicians at universities around the world to list King Abdulaziz University as an affiliation, thereby making it the seventh "best" mathematics department worldwide in the 2014 US News and World Report university rankings .

Here, the Saudi government is only playing by the rules of a game designed by western elites. This is the same logic that has been used to allow corporations, nonprofits and the military to steadily buy out chunks of academia to the point where it makes little sense to presume clear boundaries exist between these entities. As a result, numerous partnerships entangle MIT researchers with Bin Salman. On his Boston tour, he also visited IBM's Cambridge research facility, which recently partnered with MIT to form an artificial intelligence research laboratory in exchange for a $240m commitment to the university. Boston Dynamics , an MIT partner that builds robots for the US military, also offered a demonstration. Such alliances ought to cast doubt on MIT's promise to understand the "societal and ethical" implications of AI and build socially beneficial technologies.

The terms of all of these partnerships are essentially opaque, while the secrecy that surrounds them denies the community the chance to deliberate and take action. The growth of unaccountable university partnerships, like other crises facing educational institutions, stems from the absence of democratic engagement. When universities decide to sell themselves to the highest bidder, they become deaf to the interests of their students and the wider societies in which they operate. Subservience to war criminals and corporate overlords tends to follow.

[Apr 02, 2018] For First Time, Tuition Is Public College's Biggest Revenue Source by Sophie Quinton

Notable quotes:
"... In over half of states, the share was higher. In Vermont, New Hampshire, Delaware and Pennsylvania, over 70 percent of higher education funding came from tuition dollars last year. ..."
Mar 30, 2018 | www.governing.com

State colleges and universities are relying more on tuition dollars to fund their operations even as state funding rises and colleges come under pressure to keep tuition low.

Last fiscal year, for the first time, tuition revenue outpaced government appropriations for higher education in the majority of states, according to the annual higher education finance report from the State Higher Education Executive Officers Association. The association represents chief executives of statewide governing, policy and coordinating boards of postsecondary education.

Tuition dollars are becoming a more important revenue source as more students head to college, tuition prices rise, and state lawmakers struggle to return higher education funding to the per-student levels seen before the Great Recession.

The report looked at net tuition revenue, which it defined as tuition and fees minus medical student tuition, state and institutional financial aid and other waivers and discounts. It found that tuition dollars paid by families -- a figure that includes federal grants and loans -- made up 46 percent of funding for U.S. public colleges and universities in fiscal 2017, almost double tuition's share of higher education funding in 1990.

In over half of states, the share was higher. In Vermont, New Hampshire, Delaware and Pennsylvania, over 70 percent of higher education funding came from tuition dollars last year.

Nationwide, net tuition revenue peaked as a funding source for public higher education in 2013, after the collapsing economy sent a wave of students back to school at the same time as state lawmakers were cutting funding for colleges. Since then, enrollments have fallen and state investments in higher education and financial aid have increased.

RELATED Explaining the Cost of College Tuition in Every State

[Apr 02, 2018] How Many Opioid Overdoses Are Suicides

Notable quotes:
"... By Martha Bebinger of WBUR. Originally published at Kaiser Health News ..."
"... The National Suicide Prevention Lifeline is 800-273-8255. ..."
"... This story is part of a partnership that includes WBUR , NPR and Kaiser Health News. ..."
Apr 02, 2018 | www.nakedcapitalism.com

Posted on March 30, 2018 by Yves Smith Yves here. See also this related Kaiser Health News story: Omissions On Death Certificates Lead To Undercounting Of Opioid Overdoses .

It takes a lot of courage for an addict to recover and stay clean. And it is sadly not news that drug addiction and high levels of prescription drug use are signs that something is deeply broken in our society. There are always some people afflicted with deep personal pain but our system is doing a very good job of generating unnecessary pain and desperation.

By Martha Bebinger of WBUR. Originally published at Kaiser Health News

Mady Ohlman was 22 on the evening some years ago when she stood in a friend's bathroom looking down at the sink.

"I had set up a bunch of needles filled with heroin because I wanted to just do them back-to-back-to-back," Ohlman recalled. She doesn't remember how many she injected before collapsing, or how long she lay drugged-out on the floor.

"But I remember being pissed because I could still get up, you know?"

She wanted to be dead, she said, glancing down, a wisp of straight brown hair slipping from behind an ear across her thin face.

At that point, said Ohlman, she'd been addicted to opioids -- controlled by the drugs -- for more than three years.

"And doing all these things you don't want to do that are horrible -- you know, selling my body, stealing from my mom, sleeping in my car," Ohlman said. "How could I not be suicidal?"

For this young woman, whose weight had dropped to about 90 pounds, who was shooting heroin just to avoid feeling violently ill, suicide seemed a painless way out.

"You realize getting clean would be a lot of work," Ohlman said, her voice rising. "And you realize dying would be a lot less painful. You also feel like you'll be doing everyone else a favor if you die."

Ohlman, who has now been sober for more than four years, said many drug users hit the same point, when the disease and the pursuit of illegal drugs crushes their will to live. Ohlman is among at least 40 percent of active drug users who wrestle with depression, anxiety or another mental health issue that increases the risk of suicide.

Measuring Suicide Among Patients Addicted To Opioids

Massachusetts, where Ohlman lives, began formally recognizing in May 2017 that some opioid overdose deaths are suicides. The state confirmed only about 2 percent of all overdose deaths as suicides, but Dr. Monica Bhare l, head of the Massachusetts Department of Public Health, said it's difficult to determine a person's true intent.

"For one thing, medical examiners use different criteria for whether suicide was involved or not," Bharel said, and the "tremendous amount of stigma surrounding both overdose deaths and suicide sometimes makes it extremely challenging to piece everything together and figure out unintentional and intentional."

Research on drug addiction and suicide suggests much higher numbers.

"[Based on the literature that's available], it looks like it's anywhere between 25 and 45 percent of deaths by overdose that may be actual suicides," said Dr. Maria Oquendo , immediate past president of the American Psychiatric Association.

Oquendo pointed to one study of overdoses from prescription opioids that found nearly 54 percent were unintentional. The rest were either suicide attempts or undetermined.

Several large studies show an increased risk of suicide among drug users addicted to opioids, especially women. In a study of about 5 million veterans, women were eight times as likely as others to be at risk for suicide, while men faced a twofold risk.

The opioid epidemic is occurring at the same time suicides have hit a 30-year high , but Oquendo said few doctors look for a connection.

"They are not monitoring it," said Oquendo, who chairs the department of psychiatry at the University of Pennsylvania. "They are probably not assessing it in the kinds of depths they would need to prevent some of the deaths."

That's starting to change. A few hospitals in Boston, for example, aim to ask every patient admitted about substance use, as well as about whether they've considered hurting themselves.

"No one has answered the chicken and egg [problem]," said Dr. Kiame Mahaniah , a family physician who runs the Lynn Community Health Center in Lynn, Mass. Is it that patients "have mental health issues that lead to addiction, or did a life of addiction then trigger mental health problems?"

With so little data to go on, "it's so important to provide treatment that covers all those bases," Mahaniah said.

'Deaths Of Despair'

When doctors do look deeper into the reasons patients addicted to opioids become suicidal, some economists predict they'll find deep reservoirs of depression and pain.

In a seminal paper published in 2015, Princeton economists Angus Deaton and Anne Case tracked falling marriage rates, the loss of stable middle-class jobs and rising rates of self-reported pain. The authors say opioid overdoses, suicides and diseases related to alcoholism are all often "deaths of despair."

"We think of opioids as something that's thrown petrol on the flames and made things infinitely worse," Deaton said, "but the underlying deep malaise would be there even without the opioids."

Many economists agree on remedies for that deep malaise. Harvard economics professor David Cutle r said solutions include a good education, a steady job that pays a decent wage, secure housing, food and health care.

"And also thinking about a sense of purpose in life," Cutler said. "That is, even if one is doing well financially, is there a sense that one is contributing in a meaningful way?"

Tackling Despair In The Addiction Community

"I know firsthand the sense of hopelessness that people can feel in the throes of addiction," said Michael Botticelli , executive director of the Grayken Center for Addiction at Boston Medical Center; he is in recovery for an addiction to alcohol.

Botticelli said recovery programs must help patients come out of isolation and create or recreate bonds with family and friends.

"The vast majority of people I know who are in recovery often talk about this profound sense of re-establishing -- and sometimes establishing for the first time -- a connection to a much larger community," Botticelli said.

Ohlman said she isn't sure why her attempted suicide, with multiple injections of heroin, didn't work.

"I just got really lucky," Ohlman said. "I don't know how."

A big part of her recovery strategy involves building a supportive community, she said.

"Meetings; 12-step; sponsorship and networking; being involved with people doing what I'm doing," said Ohlman, ticking through a list of her priorities.

There's a fatal overdose at least once a week within her Cape Cod community, she said. Some are accidental, others not. Ohlman said she's convinced that telling her story, of losing and then finding hope, will help bring those numbers down.

The National Suicide Prevention Lifeline is 800-273-8255.

This story is part of a partnership that includes WBUR , NPR and Kaiser Health News.

[Mar 27, 2018] Over One Fifth of Student Borrowers Used Loans to Gamble on Cryptocurrencies

Notable quotes:
"... res ipsa loquitur ..."
"... I doubt you could find 20% of college students who even know where to buy crypto. Maybe, maybe ..."
Mar 27, 2018 | www.nakedcapitalism.com

res ipsa loquitur although as one wag said, this news tidbit does seem to disprove the claim that young people aren't risk takers. But it may establish that they are innumerate or more specifically, bad at statistics. One of Nassim Nicholas Taleb's recommendations about investing boils down to "Be paranoid" and "Don't be greedy" and leveraged cryptocurrency speculation is the opposite of that.

This sort of thing does not help the image of student borrowers, although it does strengthen the case for regulating cryptocurrencies far more strictly. Given the decline in the status of cab drivers, who historically have been indicators of market peaks (when cab drivers talk about their stocks, it's usually sign of a bubble), this finding may also be a proof of Peak Cryptocurrency.

From Investopedia :

According to a study by The Student Loan Report, over one-fifth of current university students with student loan debt indicated that they used their student loan money to invest in digital currency such as bitcoin.

The student loan news and information website found that 21.2% of the 1,000 students they surveyed indicated that they used their borrowed cash to gamble on the highly volatile digital currency market. While school administrators may look down upon the practice of using borrowed funds for non-school expenses, Student Loan Report indicates that there are currently no rules against it. College students are able to use loans for "living expenses," a flexible category that covers a wide range of potential necessities.

Given that 70% of retail investors in futures lose money, there's not a strong reason for thinking that latecomers to the cryptocurrency party would be stellar traders. I wonder how many students who lose so much money on bad cryptocurrency wagers that it undermines their ability to finish their course of study (presumably they really did need at least some of that "living expense" money for bona fide living expenses) will be willing to 'fess up to that fact.


JTMcPhee , March 27, 2018 at 9:40 pm

I guess that means that almost 4/5ths of students did NOT use "loan" proceeds (which are part of the whole Casino enterprise, after all) to gamble invest "expose themselves to market risk" by moving those bits representing "money" into the block chain spurt

And I also guess that means that the Puritans among us, and the mopes who want to make sure everyone else gets as screwed by "the system" as they have been by so diligently paying off those student loans/debt millstones, will now have a new line of argument about why the Banksters and the scum among the legislators and "loan servicers" and kickback-collecting higher-education administrators should be fully armed to go after mope students and graduates-without-portfolios-but-with-lots-of-"credentials" and their parents and other "guarantors" to extract that last full measure of blood from the turnipheads who signed on the dotted line without much of a clue that the "contract" was drafted by some Shylock named "Mephistopheles "

Say it loud, say it clear -- "#juststoppaying. No other way to end the game, is there? And yes, there will be blood, economically speaking, in the Street

djrichard , March 27, 2018 at 11:14 pm

It's not so much the banksters that issued these student loans as it is the Fed Gov. http://www.privatestudentloanfacts.com/the-private-student-loan-market.html

But think how it helped stimulate the economy. Except that unlike other Fed Gov spending, the Fed Gov wants this money back. D'oh! And as we know, it's very difficult to discharge student loans through bankruptcy (which at least gives the economy more slack for other debt to be paid off).

So ultimately it doesn't stimulate the economy. It just feeds various maws: the education industry and its bubble, the corporations and their inflated requirements for hiring for jobs. Edit: And the cryptocurrency bubble who knew? While subtracting from other maws: housing starts, family starts, etc.

As Mosler puts it, still the same amount of dogs chasing down the same amount of bones: https://www.youtube.com/watch?v=2vTjLwYCi24

ocop , March 27, 2018 at 11:12 pm

Come on, no way this passes the smell test. Online "mobile-friendly" polling outfit (Pollfish), no additional info even in the actual source article.

https://studentloans.net/financial-aid-funding-cryptocurrency-investments/

I doubt you could find 20% of college students who even know where to buy crypto. Maybe, maybe you could find 20% who are more aware than "heard about it on the news".

[Mar 27, 2018] Cutting 'Old Heads' at IBM

Mar 27, 2018 | news.slashdot.org

(propublica.org) As the world's dominant technology firm, payrolls at International Business Machines swelled to nearly a quarter-million U.S. white-collar workers in the 1980s. Its profits helped underwrite a broad agenda of racial equality, equal pay for women and an unbeatable offer of great wages and something close to lifetime employment, all in return for unswerving loyalty. But when high tech suddenly started shifting and companies went global, IBM faced the changing landscape with a distinction most of its fiercest competitors didn't have: a large number of experienced and aging U.S. employees .

The company reacted with a strategy that, in the words of one confidential planning document, would "correct seniority mix." It slashed IBM's U.S. workforce by as much as three-quarters from its 1980s peak, replacing a substantial share with younger, less-experienced and lower-paid workers and sending many positions overseas. ProPublica estimates that in the past five years alone, IBM has eliminated more than 20,000 American employees ages 40 and over, about 60 percent of its estimated total U.S. job cuts during those years. In making these cuts, IBM has flouted or outflanked U.S. laws and regulations intended to protect later-career workers from age discrimination, according to a ProPublica review of internal company documents, legal filings and public records, as well as information provided via interviews and questionnaires filled out by more than 1,000 former IBM employees.

[Mar 22, 2018] https://www.weforum.org/agenda/2016/12/the-world-s-top-economy-the-us-vs-china-in-five-charts/

Mar 22, 2018 | www.weforum.org

https://www.cbsnews.com/news/usa-china-income-inequality-economic-research/

"Before accounting for taxes and transfers, the U.S. ranked 10th in income inequality; among the countries with more unequal income distributions were France, the U.K. and Ireland. But after taking taxes and transfers into account, the U.S. had the second-highest level of inequality, behind only Chile. "

http://www.pewresearch.org/fact-tank/2013/12/19/global-inequality-how-the-u-s-compares/

" The five countries with the worst income inequality -- Chile, Mexico, Turkey, the United States, and Israel -- also had the five highest poverty rates in the OECD. The relationship is not perfect, however. The United Kingdom fell just outside the five worst countries for income equality, but its poverty rate was 13th lowest among developed nations."

https://247wallst.com/special-report/2015/05/29/countries-with-the-widest-gap-between-the-rich-and-the-poor/

Trust:

Suggest flipping to slide 13:

https://www.edelman.com/research/2017-trust-barometer-global-results

https://thediplomat.com/2013/06/government-for-the-people-in-china/ Reply 21 March 2018 at 11:41 AM JamesT said in reply to Terry... Terry

I've been thinking about this as well. I went looking for a graph of median income in China and the US over the last 20 years ... and could not find one. What I would really like to see is a graph of median income increases over the last 20 years - I would argue this is more relevant than the easy to find graphs of GDP increases.

Median income in Russia increased something like 270% in inflation adjusted terms during the first 10 years that Putin was in power. The Economist claims this was solely due to the increase in oil prices. I went looking at countries that had comparable oil-production-per-person and found that Canada (whose oil production per person is essentially identical to Russia) saw its median income increase only 9% in the same period.

This isn't to say that Putin's leadership is necessarily good in the long term, but the western press are clearly ignoring important economic statistics regarding both China and Russia. Reply 21 March 2018 at 03:10 PM Fred said in reply to Terry... Terry,

"by some measures" If you torture the data long inenough it confesses. So the US is one of the five worst in income inequality? Maybe those Chineese imigrants should all stay in China to enjoy their "percentages". Of course they might first ask just what the 400% increase in Chineese income means. Oh, that's right, the 400% increase from almost nothing to 4 times almost nothing. The negative 1% reduction in bottom 50% of income distribuiton in the US over that 4 decades resulted in:

"Median individual income for all earners in the workforce was $37,610.00, and the breakpoint to be a one-percenter (99th percentile) was $300,800.00."

https://dqydj.com/united-states-income-brackets-percentiles/

So the 50% percentile in the US has a 37K icome. What is it for China, it certainly isn't 37K. That's right, acording to the link you provided it's 14,600 USD. In China, with the official exchange rate.


James T,

"but the western press are clearly ignoring important economic statistics regarding both China and Russia."

Yes indeed, they ignore the actual data and repeat out percentages with no idea of the underlying facts of how those percentages were created and not bothering to ask how they were calculated. Reply 21 March 2018 at 09:11 PM

[Mar 12, 2018] There is no democracy without economic democracy by Jason Hirthler

Highly recommended!
Like many high demand cults neoliberalism is a trap, from which it is very difficult to escape...
Notable quotes:
"... A large, open-border global free market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism. ..."
"... Globalists, as neoliberal capitalists are often called, also understood that democracy, defined by a smattering of individual rights and a voting booth, was the ideal vehicle to usher neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes no demands in the economic sphere. Socialism does. Communism does. These models directly address ownership of the means of production. Not so democratic capitalism. This permits the globalists to continue to own the means of production while proclaiming human rights triumphant in nations where interventions are staged. ..."
"... The enduring lie is that there is no democracy without economic democracy. ..."
turcopolier.typepad.com

Part 3 - A False Promise

This 'Washington Consensus' is the false promise promoted by the West. The reality is quite different. The crux of neoliberalism is to eliminate democratic government by downsizing, privatizing, and deregulating it. Proponents of neoliberalism recognize that the state is the last bulwark of protection for the common people against the predations of capital. Remove the state and they'll be left defenseless .

Think about it. Deregulation eliminates the laws. Downsizing eliminates departments and their funding. Privatizing eliminates the very purpose of the state by having the private sector take over its traditional responsibilities.

Ultimately, nation-states would dissolve except perhaps for armies and tax systems. A large, open-border global free market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism.

Globalists, as neoliberal capitalists are often called, also understood that democracy, defined by a smattering of individual rights and a voting booth, was the ideal vehicle to usher neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes no demands in the economic sphere. Socialism does. Communism does. These models directly address ownership of the means of production. Not so democratic capitalism. This permits the globalists to continue to own the means of production while proclaiming human rights triumphant in nations where interventions are staged.

The enduring lie is that there is no democracy without economic democracy.

What matters to the one percent and the media conglomerates that disseminate their worldview is that the official definitions are accepted by the masses. The real effects need never be known. The neoliberal ideology (theory) thus conceals the neoliberal reality (practice). And for the masses to accept it, it must be mass produced. Then it becomes more or less invisible by virtue of its universality.

Source, links:

https://www.counterpunch.org/2018/03/02/colonizing-the-western-mind/
[ 1 ] [ 2 ]

[Mar 03, 2018] Strange science, economics. Judging from the titles, much of it consists of neoliberal cheerleading

Neoliberal economists are a new type of clergy. As simple as this. Neoliberal God is great that's what they are preaching to students.
Notable quotes:
"... Bronze Age: Greatest Age EVAH! ..."
"... It's surprising economists feel the need to engage in happy talk, considering that markets are supposed to be natural, just, and efficient. Like clergy preaching to a perpetually backsliding laity about the one true God, Whom only a fool would doubt. If God were so great, there'd be no need to harp on it. In any case, this goes some way toward accounting for Bennet's statement. ..."
"... It takes a half-educated person to say something like that. First you get the ideas by way of a certain education, and then you don't think about them, in part because the educators discourage that kind of thing. ..."
Mar 03, 2018 | www.nakedcapitalism.com

Paul Cardan , March 2, 2018 at 3:12 pm

"[Capitalism] has been the greatest engine of, it's been the greatest anti-poverty program and engine of progress that we've seen."

I can almost smell the economics section of my local bookstore. Strange science, economics. Judging from the titles, much of it consists of cheerleading. Very different from history, anthropology, or sociology.

I never see history titles like Bronze Age: Greatest Age EVAH! It's surprising economists feel the need to engage in happy talk, considering that markets are supposed to be natural, just, and efficient. Like clergy preaching to a perpetually backsliding laity about the one true God, Whom only a fool would doubt. If God were so great, there'd be no need to harp on it. In any case, this goes some way toward accounting for Bennet's statement.

It takes a half-educated person to say something like that. First you get the ideas by way of a certain education, and then you don't think about them, in part because the educators discourage that kind of thing.

[Feb 25, 2018] Divide and Rule

Notable quotes:
"... "Liberals" stopped caring about those things after Clinton showed them the "third way," which was really just a way to be kinder, gentler conservatives. ..."
"... the best and most well-founded causations history I've come across directly relating to "Divide & Rule". ..."
Feb 22, 2018 | angrybearblog.com

Karl Kolchak, February 21, 2018 11:38 pm

" liberals are concerned about minorities and the poor."

What a joke. "Liberals" stopped caring about those things after Clinton showed them the "third way," which was really just a way to be kinder, gentler conservatives.

LEFTISTS still care about minorities and the poor, which is why liberals do everything in their power to keep them from ever getting elected and would rather throw an election to someone like Trump than let Bernie Sanders be president.

Longtooth , February 22, 2018 8:04 pm

Here's paper that economistsview just linked to today. It traces the events leading to Trump -- or shall I say leading to the recognition by those that have been economically disenfranchised which led to Trump.
http://www.cesifo-group.de/DocDL/cesifo1_wp6868.pdf

In it's composite as well as most (though not all) causes the paper describes, it is the best and most well-founded causations history I've come across directly relating to "Divide & Rule".

[Feb 23, 2018] On the Link between US Pay and Productivity

Notable quotes:
"... American Prospect ..."
Feb 23, 2018 | economistsview.typepad.com

On the link between US pay and productivity, by Anna Stansbury and Lawrence Summers, VoxEU :

Pay growth for middle class workers in the US has been abysmal over recent decades – in real terms, median hourly compensation rose only 11% between 1973 and 2016. 1 At the same time, hourly labour productivity has grown steadily, rising by 75%.

This divergence between productivity and the typical worker's pay is a relatively recent phenomenon. Using production/nonsupervisory compensation as a proxy for median compensation (since there are no data on the median before 1973), Bivens and Mishel (2015) show that typical compensation and productivity grew at the same rate over 1948-1973, and only began to diverge in 1973 (see Figure 1).

Figure 1 Labour productivity, average compensation, and production/nonsupervisory compensation 1948-2016

Stansbury20febfig1

Notes : Labour productivity: total economy real output per hour (constructed from BLS and BEA data). Average compensation: total economy compensation per hour (constructed from BLS data). Production/nonsupervisory compensation: real compensation per hour, production and nonsupervisory workers (Economic Policy Institute).

What does this stark divergence imply about the relationship between productivity and typical compensation? Since productivity growth has been so much faster than median pay growth, the question is how much does productivity growth benefit the typical worker? 2
A number of authors have raised these questions in recent years. Harold Meyerson, for example, wrote in American Prospect in 2014 that "for the vast majority of American workers, the link between their productivity and their compensation no longer exists", and the Economist wrote in 2013 that "unless you are rich, GDP growth isn't doing much to raise your income anymore". Bernstein (2015) raises the concern that "[f]aster productivity growth would be great. I'm just not at all sure we can count on it to lift middle-class incomes." Bivens and Mishel (2015) write "although boosting productivity growth is an important long-run goal, this will not lead to broad-based wage gains unless we pursue policies that reconnect productivity growth and the pay of the vast majority".
Has typical compensation delinked from productivity?
Figure 1 appears to suggest that a one-to-one relationship between productivity and typical compensation existed before 1973, and that this relationship broke down after 1973. On the other hand, just as two time series apparently growing in tandem does not mean that one causes the other, two series diverging may not mean that the causal link between the two has broken down. Rather, other factors may have come into play which appear to have severed the connection between productivity and typical compensation.
As such there is a spectrum of possibilities for the true underlying relationship between productivity and typical compensation. On one end of the spectrum – which we call 'strong delinkage' – it's possible that factors are blocking the transmission mechanism from productivity to typical compensation, such that increases in productivity don't feed through to pay. At the opposite end of the spectrum – which we call 'strong linkage' – it's possible that productivity growth translates fully into increases in typical workers' pay, but even as productivity growth has been acting to raise pay, other factors (orthogonal to productivity) have been acting to reduce it. Between these two ends of the spectrum is a range of possibilities where some degree of linkage or delinkage exists between productivity and typical compensation.
In a recent paper, we estimate which point on this linkage-delinkage spectrum best describes the productivity-typical compensation relationship (Stansbury and Summers 2017). Using medium-term fluctuations in productivity growth, we test the relationship between productivity growth and two key measures of typical compensation growth: median compensation, and average compensation for production and nonsupervisory workers.
Simply plotting the annual growth rates of productivity and our two measures of typical compensation (Figure 2) suggests support for quite substantial linkage – the series seem to move together, although typical compensation growth is almost always lower.

Figure 2 Change in log productivity and typical compensation, three-year moving average

Stansbury20febfig2

Notes : Data from BLS, BEA and Economic Policy Institute. Series are three-year backward-looking moving averages of change in log variable.

Making use of the high frequency changes in productivity growth over one- to five-year periods, we run a series of regressions to test this link more rigorously. We find that periods of higher productivity growth are associated with substantially higher growth in median and production/nonsupervisory worker compensation – even during the period since 1973, where productivity and typical compensation have diverged so much in levels. A one percentage point increase in the growth rate of productivity has been associated with between two-thirds and one percentage point higher growth in median worker compensation in the period since 1973, and with between 0.4 and 0.7 percentage points higher growth in production/nonsupervisory worker compensation. These results suggest that there is substantial linkage between productivity and median compensation (even the strong linkage view cannot be rejected), and that there is a significant degree of linkage between productivity and production/nonsupervisory worker compensation.
How is it possible to find this relationship when productivity has clearly grown so much faster than median workers' pay? Our findings imply that even as productivity growth has been acting to push workers' pay up , other factors not associated with productivity growth have acted to push workers' pay down . So while it may appear on first glance that productivity growth has not benefited typical workers much, our findings imply that if productivity growth had been lower, typical workers would have likely done substantially worse.
If the link between productivity and pay hasn't broken, what has happened?
The productivity-median compensation divergence can be broken down into two aspects of rising inequality: the rise in top-half income inequality (divergence between mean and median compensation) which began around 1973, and the fall in the labour share (divergence between productivity and mean compensation) which began around 2000.
For both of these phenomena, technological change is often invoked as the primary cause. Computerisation and automation have been put forward as causes of rising mean-median income inequality (e.g. Autor et al. 1998, Acemoglu and Restrepo 2017); and automation, falling prices of investment goods, and rapid labour-augmenting technological change have been put forward as causes of the fall in the labour share (e.g. Karabarbounis and Neiman 2014, Acemoglu and Restrepo 2016, Brynjolffson and McAfee 2014, Lawrence 2015).
At the same time, non-purely technological hypotheses for rising mean-median inequality include the race between education and technology (Goldin and Katz 2007), declining unionisation (Freeman et al. 2016), globalisation (Autor et al. 2013), immigration (Borjas 2003), and the 'superstar effect' (Rosen 1981, Gabaix et al. 2016). Non-technological hypotheses for the falling labour share include labour market institutions (Levy and Temin 2007, Mishel and Bivens 2015), market structure and monopoly power (Autor et al. 2017, Barkai 2017), capital accumulation (Piketty 2014, Piketty and Zucman 2014), and the productivity slowdown itself (Grossman et al. 2017).
While we do not analyse these theories in detail, a simple empirical test can help distinguish the relative importance of these two categories of explanation – purely technology-based or not – for rising mean-median inequality and the falling labour share. More rapid technological progress should cause faster productivity growth – so, if some aspect of faster technological progress has caused inequality, we should see periods of faster productivity growth come alongside more rapid growth in inequality.
We find very little evidence for this. Our regressions find no significant relationship between productivity growth and changes in mean-median inequality, and very little relationship between productivity growth and changes in the labour share. In addition, as Table 1 shows, the two periods of slower productivity growth (1973-1996 and 2003-2014) were associated with faster growth in inequality (an increasing mean/median ratio and a falling labour share).
Taken together, this evidence casts doubt on the idea that more rapid technological progress alone has been the primary driver of rising inequality over recent decades, and tends to lend support to more institutional and structural explanations.

Table 1 Average annual growth rates of productivity, the labour share and the mean/median ratio during the US' productivity booms and productivity slowdowns


mulp , February 20, 2018 at 12:08 PM

The 70s was when the ideology of free lunch economics was born and then rose to take over virtually the entirety of economics.

Even Krugman adopts a lot of free lunch economics.

In free lunch economics, costs are dependent on price, not price dependent on costs. And profits rising on maximum efficiency, maximum factor utilization, not profits going to zero when factor utilization and efficiency are maximized.

Free lunch economics is the opposite of Keynesian principles. Free lunch economists prescribe the opposite of what Keynes prescribed in similar circumstances.

Keynes called for maximizing aggregate labor costs. Free lunch economists call for minimizing aggregate labor costs.

As all real economic costs are labor costs, everything else being profits and rents, when Bernie bros call for lower costs, or oppose higher costs, they are arguing for lower labor costs, lower wages. Economics is zero sum.

Food costs are low because of government subsidies and government policies promoting low labor costs, low wages.

Progressives should be opposed to SNAP and food banks which are directly or indirectly government funded/subsidized. The solution is to ensure jobs are available than pay wages high enough to buy food that farmers sell at high prices which allow them to pay all their bills.

FDR and Congress set price floors for many goods, and paid workers living wages to do productive work. Conservatives fought these measures to increase costs. Note Hoover was very interested in building capital assets, but he wanted workers to be paid as little as possible, and as few as possible. He promoted working workers to death to cut costs, even when the assets built would certainly generate high returns over their useful lives.

Friedman created the intellectual free lunch theory to justify Hoover's business theory applied to government policy.

Friedman invented the free lunch welfare handout to make the free lunch economy work, because he knew economies are zero sum. Instead of SNAP which is restricted cash, he called for unrestricted cash so labor costs could be cut to increase profits, with government free lunch handouts given to workers to pay the high profits on the goods they were paid to produce.

Again, this is contrary to Keynes and FDR.

Yet Bernie progressives call for Friedman's free lunch economics subsidy of profits in consumer spending subsidies to enable low wages and high profits.

This research and paper merely provide evidence that Friedman's free lunch economics have driven public policy and private sector investment.

Milton Friedman's free lunch economics principles have successfully driven lower productivity growth as he intended, based on his Newsweek articles circa 1970, and based on other 70s era statements and lectures.

Christopher H. , February 20, 2018 at 04:13 PM
What does Summers propose to do to increase productivity? Work the workers harder?

The low hanging fruit is full employment which as Dean Baker and others have discussed will spur productivity growth.

We are seeing an experiment right now with low unemployment.

RGC , February 21, 2018 at 04:07 AM
Unions lost bargaining power since Reagan.

Illegal immigrant labor took menial jobs (meatpacking, landscaping, construction).

The government stopped prosecuting employers for hiring illegal immigrants.

Manufacturing jobs went overseas.

Foreign manufacturers located in right-to-work states.

US Manufacturers stopped competing with foreigners because it was too hard and the profit was too low (GE).

The potential drop in GDP was replaced by borrowing:

https://fred.stlouisfed.org/series/CMDEBT

llisa2u2 , February 21, 2018 at 04:50 AM
OMG- how many understatements can be written, without acknowledging basic facts and truth.

A good place to start would be a similar, I mean really similar, and use CEO pay. Come on lets see a CEO pay VS productivity - the CEO's sure aren't doing the work, and neither are the midline managers. Come on lets see some real good charts on "divergence" factors starting in 1973. Quit the BS. The economy is presently increasing based on human predation. Ignore it, til it stares you in the face, upfront and personal.

llisa2u2 , February 21, 2018 at 05:06 AM
https://www.advisorperspectives.com/dshort/updates/2018/02/15/five-decades-of-middle-class-wages-january-2017-update
RGC , February 21, 2018 at 05:10 AM
http://www.slate.com/articles/business/the_united_states_of_debt/2016

I couldn't find one at FRED.

Maybe this:

Five Charts That Show Americans Families' Debt Crisis

U.S. households owe trillions in student loans, credit card loans, auto loans, and mortgages.

By Chris Kirk

http://www.slate.com/culture/2018/02/trevor-noah-has-some-terrible-ideas-for-addressing-school-shootings.html

llisa2u2 , February 21, 2018 at 05:11 AM
https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective

Spinning, Spinning- yeah let's hear some more from left and right!

llisa2u2 , February 21, 2018 at 05:13 AM
Trickling down is NON-FACT.

SUCKING UP is "INDEED" the real fact of the economic dynamics over the last 50 years.

llisa2u2 , February 21, 2018 at 05:22 AM
In my effort to help counter the blatant irresponsibility of not only..... but also, practically every leading economist worldwide- here EV- start interviewing and publishing this man's works- https://www.sciencedirect.com/science/article/pii/S1057521914001070
llisa2u2 , February 21, 2018 at 05:32 AM
From cited link- for those who want the reason why, I even posted a link on banking, when this article is on labor divergence etc. etc.

5.4.1. Implications for economic theory

The empirical evidence shows that of the three theories of banking, it is the one that today has the least influence and that is being belittled in the literature that is supported by the empirical evidence. Furthermore, it is the theory which was widely held at the end of the 19th century and in the first three decades of the twentieth. It is sobering to realise that since the 1930s, economists have moved further and further away from the truth, instead of coming closer to it. This happened first via the half-truth of the fractional reserve theory and then reached the completely false and misleading financial intermediation theory that today is so dominant. Thus this paper has found evidence that there has been no progress in scientific knowledge in economics, finance and banking in the 20th century concerning one of the most important and fundamental facts for these disciplines. Instead, there has been a regressive development. The known facts were unlearned and have become unknown. This phenomenon deserves further research. For now it can be mentioned that this process of unlearning the facts of banking could not possibly have taken place without the leading economists of the day having played a significant role in it. The most influential and famous of all 20th century economists, as we saw, was a sequential adherent of all three theories, which is a surprising phenomenon. Moreover, Keynes used his considerable clout to slow scientific analysis of the question whether banks could create money, as he instead engaged in ad hominem attacks on followers of the credit creation theory. Despite his enthusiastic early support for the credit creation theory (Keynes, 1924), only six years later he was condescending, if not dismissive, of this theory, referring to credit creation only in inverted commas. He was perhaps even more dismissive of supporters of the credit creation theory, who he referred to as being part of the "Army of Heretics and Cranks, whose numbers and enthusiasm are extraordinary", and who seem to believe in "magic" and some kind of "Utopia" (Keynes, 1930, vol. 2, p. 215).33

Needless to mention, such rhetoric is not conducive to scientific argument. But this technique was followed by other economists engaged in advancing the fractional reserve and later financial intermediation theories. US Federal Reserve staffer Alhadeff (1954) argued similarly during the era when economists worked on getting the fractional reserve theory established:
"One complication worth discussing concerns the alleged "creation" of money by bankers. It used to be claimed that bankers could create money by the simple device of opening deposit accounts for their business borrowers. It has since been amply demonstrated that under a fractional reserve system, only the totality of banks can expand deposits to the full reciprocal of the reserve ratio. [Original footnote: 'Chester A. Phillips, Bank Credit (New York: Macmillan, 1921), chapter 3, for the classical refutation of this claim.'] The individual bank can normally expand to an amount about equal to its primary deposits" (p. 7).


The creation of credit by banks had become, in the style of Keynes (1930), an "alleged 'creation'", whereby rhetorically it was suggested that such thinking was simplistic and hence could not possibly be true. Tobin used the rhetorical device of abductio ad absurdum to denigrate the credit creation theory by incorrectly suggesting it postulated a 'widow's cruse', a miraculous vessel producing unlimited amounts of valuable physical goods, and thus its followers were believers in miracles or utopias.

This same type of rhetorical denigration of and disengagement with the credit creation theory is also visible in the most recent era. For instance, the New Palgrave Money (Eatwell et al., 1989), is an influential 340-page reference work that claims to present a 'balanced perspective on each topic' (Eatwell et al., 1989, p. viii). Yet the financial intermediation theory is dominant, with a minor representation of the fractional reserve theory. The credit creation theory is not presented at all, even as a possibility. But the book does include a chapter entitled "Monetary cranks". In this brief chapter, Keynes' (1930) derogatory treatment of supporters of the credit creation theory is updated for use in the 1990s, with sharpened claws: Ridicule and insult is heaped on several fateful authors that have produced thoughtful analyses of the economy, the monetary system and the role of banks, such as Nobel laureate Sir Frederick Soddy (1934) and C.H. Douglas (1924). Even the seminal and influential work by Georg Friedrich Knapp (1905), still favourably cited by Keynes (1936), is identified as being created by a 'crank'. What these apparently wretched authors have in common, and what seems to be their main fault, punishable by being listed in this inauspicious chapter, is that they are adherents of the credit creation theory. But, revealingly, their contributions are belittled without it anywhere being stated what their key tenets are and that their analyses centre on the credit creation theory, which itself remains unnamed and is never spelled out. This is not a small feat, and leaves one pondering the possibility that the Eatwell et al. (1989) tome was purposely designed to ignore and distract from the rich literature supporting the credit creation theory. Nothing lost, according to the authors, who applaud the development that due to
"the increased emphasis given to monetary theory by academic economists in recent decades, the monetary cranks have largely disappeared from public debate " (p. 214).


And so has the credit creation theory. Since the tenets of this theory are never stated in Eatwell et al. (1989), the chapter on 'Cranks' ends up being a litany of ad hominem denigration, defamation and character assassination, liberally distributing labels such as 'cranks', 'phrase-mongers', 'agitators', 'populists', and even 'conspiracy theorists' that believe in 'miracles' and engage in wishful thinking, ultimately deceiving their readers by trying to "impress their peers with their apparent understanding of economics, even though they had no formal training in the discipline" (p. 214). All that we learn about their actual theories is that, somehow, these ill-fated authors are "opposed to private banks and the 'Money Power' without their opposition leading to more sophisticated political analysis" (p. 215). Any reading of the highly sophisticated Soddy (1934) quickly reveals such labels as unfounded defamation.

To the contrary, the empirical evidence presented in this paper has revealed that the many supporters of the financial intermediation theory and also the adherents of the fractional reserve theory are flat-earthers that believe in what is empirically proven to be wrong and which should have been recognisable as being impossible upon deeper consideration of the accounting requirements. Whether the authors in Eatwell et al. (1989) did in fact know better is an open question that deserves attention in future research. Certainly the unscientific treatment of the credit creation theory and its supporters by such authors as Keynes, who strongly endorsed the theory only a few years before authoring tirades against its supporters, or by the authors in Eatwell et al. (1989), raises this possibility.

5.4.2. Implications for government policy

There are other, far-reaching ramifications of the finding that banks individually create credit and money when they do what is called 'lending money'. It is readily seen that this fact is important not only for monetary policy, but also for fiscal policy, and needs to be reflected in economic theories. Policies concerning the avoidance of banking crises, or dealing with the aftermath of crises require a different shape once the reality of the credit creation theory is recognised. They call for a whole new paradigm in monetary economics, macroeconomics, finance and banking (for details, see for instance Werner, 1997, 2005, 2012, 2013a,b) that is based on the reality of banks as creators of the money supply. It has potentially important implications for other disciplines, such as accounting, economic and business history, economic geography, politics, sociology and law.

5.4.3. Implications for bank regulation

The implications are far-reaching for bank regulation and the design of official policies. As mentioned in the Introduction, modern national and international banking regulation is predicated on the assumption that the financial intermediation theory is correct. Since in fact banks are able to create money out of nothing, imposing higher capital requirements on banks will not necessarily enable the prevention of boom–bust cycles and banking crises, since even with higher capital requirements, banks could still continue to expand the money supply, thereby fuelling asset prices, whereby some of this newly created money can be used to increase bank capital. Based on the recognition of this, some economists have argued for more direct intervention by the central bank in the credit market, for instance via quantitative credit guidance (Werner, 2002, 2003a, 2005).

5.4.4. Monetary reform

The Bank of England's (2014b) recent intervention has triggered a public debate about whether the privilege of banks to create money should in fact be revoked (Wolf, 2014). The reality of banks as creators of the money supply does raise the question of the ideal type of monetary system. Much research is needed on this account. Among the many different monetary system designs tried over the past 5000 years, very few have met the requirement for a fair, effective, accountable, stable, sustainable and democratic creation and allocation of money. The view of the author, based on more than twenty-three years of research on this topic, is that it is the safest bet to ensure that the awesome power to create money is returned directly to those to whom it belongs: ordinary people, not technocrats. This can be ensured by the introduction of a network of small, not-for-profit local banks across the nation. Most countries do not currently possess such a system. However, it is at the heart of the successful German economic performance in the past 200 years. It is the very Raiffeisen, Volksbank or Sparkasse banks – the smaller the better – that were helpful in the implementation of this empirical study that should serve as the role model for future policies concerning our monetary system. In addition, one can complement such local public bank money with money issued by local authorities that is accepted to pay local taxes, namely a local public money that has not come about by creating debt, but that is created for services rendered to local authorities or the community. Both forms of local money creation together would create a decentralised and more accountable monetary system that should perform better (based on the empirical evidence from Germany) than the unholy alliance of central banks and big banks, which have done much to create unsustainable asset bubbles and banking crises (Werner, 2013a,b).


AND, be sure to read why a lot of present economist's are so OFF "talking points" that they don't know they are even off the fundamental talking points, and way off track! You have to start reading the Werner article from the beginning to understand that preceding exclamatory sentence.

Christopher H. , February 21, 2018 at 09:54 AM
Here's something for the Neolibros who desperately want an excuse for why Hillary lost to the orange clown.

https://www.politico.com/magazine/story/2018/02/18/confessions-of-a-russiagate-skeptic-217024

Confessions of a Russiagate Skeptic

Why I have my doubts about whether Trump colluded with Moscow.

By BLAKE HOUNSHELL February 18, 2018

f, like me, you've been following every twist and turn of the Russia investigations, you've probably wrestled with the same question that has been gnawing at me for more than a year now: What if there's nothing there?

No, I'm not denying the voluminous evidence that Russia, at Kremlin strongman Vladimir Putin's personal direction, sought to meddle in the 2016 election, and that Donald Trump was clearly his man. The indictment on Friday of 13 Russians -- and the incredible forensic detail in the 37-page complaint filed by Special Counsel Robert Mueller's team -- ought to have convinced any reasonable person that the Russia investigation is definitely a somethingburger. But what kind of somethingburger is it?


President Trump has seized on Deputy Attorney General Rod Rosenstein's statement that "there is no allegation in the indictment that any American was a knowing participant in this illegal activity" to say that the special counsel has vindication his oft-repeated refrain that there was "NO COLLUSION" between Russia and the Trump campaign. This is obviously nonsense -- the key words in Rosenstein's remarks being "in the indictment," which in any case dealt only with a sliver of Russian efforts to tilt the election in Trump's favor.

Of course, Mueller has put some serious points on the board. In addition to the 13 Russians and three Russian organizations from Friday's indictments, we've also seen two indictments of Trump associates thus far -- former Trump campaign chairman/manager Paul Manafort and his wingman Rick Gates -- and two plea bargains, from sometime national security adviser Michael Flynn and volunteer campaign adviser George Papadapoulos. There is also other stuff hanging out there -- most of all Donald Trump Jr.'s infamous meeting in Trump Tower, the one he enthusiastically scheduled after being told the Russians on offer had dirt on Hillary Clinton. Mueller's team has had nothing to say -- yet? -- about the hacked emails of the Democratic National Committee or Clinton campaign chairman John Podesta. And there is no indication, despite the professed optimism of White House lawyer Ty Cobb, that they are wrapping up anytime soon.

There are, of course, odd aspects of Trump's behavior that arouse suspicions. His obsequious praise of Putin. The aborted effort to roll back the old Russia sanctions, and the failure to enforce the new ones. His refusal to accept that Moscow meddled in the election, despite the conclusions of his own staff, the intelligence community and pretty much everyone looking at the evidence in good faith. Firing his FBI director and reportedly ordering the firing of the special counsel. His constant fulminations against the "Russia hoax." The fact that he hasn't directed any effort to safeguard the 2018 midterms. If Trump is guilty, he sure is acting like it.

And there is the fact Trump aides have repeatedly lied about the fact, and extent, of contact between campaign officials and Russia. If the Trump Tower meeting was as innocuous as Donald Jr. says it was, for instance, why the misleading claim that it was about "adoptions"?

I keep coming back the slapdash nature of Trump's 2016 operation, and the chaos and dysfunction that everyone who covered that campaign saw play out each day. Like the Trump White House, the Trump campaign was a viper's nest of incompetence and intrigue, with aides leaking viciously against one another almost daily. So much damaging information poured out of Trump Tower that it's hard to believe a conspiracy to collude with Moscow to win the election never went public. If there was such a conspiracy, it must have been a very closely guarded secret.

Then there's the Trump factor to consider. Here's a man who seems to share every thought that enters his head, almost as soon as he enters it. He loves nothing more than to brag about himself, and he's proven remarkably indiscreet in the phone calls he makes with "friends" during his Executive Time -- friends who promptly share the contents of those conversations with D.C. reporters. If Trump had cooked up a scheme to provide some favor to Putin in exchange for his election, wouldn't he be tempted to boast about it to someone?

And there are aspects of the Russia scandal, too, that don't quite add up for me. Take Flynn's plea bargain. As Preet Bharara, the former U.S. attorney for the Southern District of New York, noted after the deal became public, prosecutors usually prefer to charge participants in a conspiracy with charges related to the underlying crime. But Flynn pleaded guilty only to lying to the FBI, which Bharara surmised suggests might mean Mueller didn't have much on him. It certainly seems unlikely that any prosecutor would charge Flynn for violating the 219-year-old Logan Act, a constitutionally questionable law that has never been tested in court, for his chats with the Russian ambassador. It's not even clear if the (stupid) idea of using secure Russian communications gear, as Flynn and Trump's son-in-law Jared Kushner reportedly considered doing, would have been a crime.

Then there is Papadopoulos, the hapless campaign volunteer who drunkenly blabbed to the Australian ambassador to London that the Russians were sitting on loads of hacked emails. He, likewise, confessed only to lying to the FBI. Papadopoulos desperately tried to arrange meetings between Trump or top Trump officials and Russians, which apparently never happened. Papadopoulos has been cooperating with Mueller for months, but how much does he really have to offer? He seems like an attention-seeking wannabe -- the kind who puts "Model U.N. participant" on his resume.

Speaking of attention-seeking wannabes, Carter Page was another volunteer campaign adviser who was enthusiastic about collaborating with Russia. His writings and comments suggest he has been a Putin apologist for years. But anyone who has seen Page's TV interviews or read through his congressional testimony can tell that there's something not quite right about him. He's apparently broke, doesn't have a lawyer, and has issued lengthy, bizarre statements comparing himself to Martin Luther King, Jr. Back in 2013, when a Russian agent tried to recruit Page, he described him as too much of an "idiot" to bother with. This is the mastermind of the Russia scandal?

As for Manafort and Gates, the charges against them are serious and detailed. They stand accused of failing to register as foreign agents for their overseas work, as well as various offenses related to money laundering. But Mueller has yet to charge them with any crimes related to their work on the Trump campaign. Gates is reportedly working out a cooperation deal with Mueller's team -- perhaps he has stories to tell. And we can't rule out the idea that Mueller is prepared to file superseding charges against either or both of the two men. But so far, their alleged crimes seem unrelated to 2016.

There is, of course, plenty of public evidence that Trump was all too happy to collude with Putin. "Russia, if you're listening, I hope you're able to find the 30,000 emails that are missing," springs to mind, not to mention Trump's endless invocation of WikiLeaks in the closing weeks of the 2016 campaign. What's particularly eerie, too, is how Trump's divisive racial rhetoric and claims about how the election was going to be "rigged" in favor of Hillary Clinton echoes the messages described in Mueller's latest indictment. Not to mention the voluminous fodder Trump has given Mueller for a (very) hypothetical obstruction of justice case.

Mueller's team doesn't leak, and he's repeatedly surprised us, as he did again on Friday. But I'm still waiting for a smoking gun -- and the special counsel hasn't shown us one yet, assuming he ever will.

Christopher H. said in reply to kurt... , February 21, 2018 at 06:24 PM
We'll see when Mueller finally wraps up his investigation, but we know that garbage people like you and Yggies are taking this opportunity to attack the Left even though there is on evidence for it.

Bernie and Jill Stein supporters aren't implicated at all and only scum like you would suggest so. No doubt you are paid by DNC Super PACs.

https://www.jacobinmag.com/2018/02/russiagate-bernie-sanders-jill-stein-msnbc

Russiagate Targets the Left
BY
BRANKO MARCETIC
Liberal conspiracy theorists are using Russiagate to smear Bernie Sanders and Jill Stein. How long until they come for you?

id Russia conspire to put its thumb on the scales for Bernie Sanders and Jill Stein in 2016?

If you've paid any attention to mainstream coverage of Robert Mueller's indictment of the Russians involved in running an online troll farm that opposed Hillary Clinton's campaign, then you're probably certain the answer is "yes." There's been no shortage of headlines declaring that the accused -- typically referred to simply as "Russians" -- "tried to help" or "aimed to help" the two left-wing candidates, or that they "appear to have been helped by Russian election interference." Even the New York Times, the paper of record, declared that the company, Internet Research Agency, aimed to "bolster" Sanders and Stein's candidacies.

You'll find this same narrative on the nominally liberal MSNBC. Stein was grilled on MSNBC about the Russian attempt to "boost" her campaign. Meanwhile, Ari Melber, one of the network's pundits, seemed to suggest there was something fishy going on between Sanders and the Russian trolls with an innuendo-laden question to Democratic Sen. Richard Blumenthal.

"It says in here that Donald Trump was the main intended beneficiary, and Bernie Sanders was the other major party candidate who was a beneficiary," said Melber. "Neither of them have clearly stood up today and said: 'I don't want that help from the Russians, please don't do that kind of thing for me, and anything that happened, I disclaim.'"

It all sounds pretty damning. Until you read the actual indictment.


Fast and Loose
The sole reference to Stein in the nearly 10,000-word document is a sentence that mentions one single Instagram post from Blacktivist, an account controlled by the company, saying: "Choose peace and vote for Jill Stein. Trust me, it's not a wasted vote."

Sanders, meanwhile, appears twice. The first mention is when the document states the company's work was "primarily intended to communicate derogatory information about Hillary Clinton and to support Bernie Sanders and then-candidate Donald Trump." The second is a few lines down, when it provides an example of this support: an outline of themes for future content that was circulated around the company, urging employees to "use any opportunity to criticize Hillary and the rest (except Sanders and Trump -- we support them)." The indictment doesn't specify anything else, including any examples of material support for Sanders's campaign.

These scant references comprise the sole basis for headline after headline about the Kremlin-backed trolls working for Sanders and Stein's campaigns. Some Clinton backers such as Joy-Ann Reid uncritically spread the narrative that "Russia was helping Jill Stein and Sanders," while others used it as a launching pad to suggest Sanders was knowingly in cahoots with the Russian efforts.

MSNBC's Melber has been particularly dogged in pushing this narrative. Despite the lack of evidence in the indictment, Melber claimed on his show that "Mueller has shown that [the Russians] spent 2016 pushing another campaign to elect Bernie Sanders."

When Sanders, appearing on Meet the Press, said that the trolls only began flooding pro-Sanders Facebook pages with anti-Clinton content after she had already won the nomination -- a claim backed up by previous reporting -- Melber pushed back.

"That may be how Sanders remembers it," said Melber. "But now we know it began much earlier with those February marching orders, and the very next month a Sanders volunteer, John Mattes, says a 'huge wave of fake news stories' slamming Clinton from abroad targeted Sanders supporters."

The quote that Melber is referring to -- "huge wave of fake news stories" -- comes from this Guardian piece from July 2017. It also happens to have been wildly misrepresented by Melber.

For one, the words were never uttered by Mattes, a Sanders campaign volunteer in California and investigative journalist who played a role in bringing the Iran-Contra scandal to light in the 1980s. Rather, the phrase was used by the Guardian article's author, Julian Borger. Secondly, at no point is it stated that this "wave" was targeting Sanders supporters. In fact, reading the whole passage it's clear that neither Borger nor Mattes was saying that the "wave" had anything to do with Sanders at all. Here is the passage in full:

A huge wave of fake news stories originating from eastern Europe began washing over the presidential election months earlier, at the height of the primary campaign. John Mattes, who was helping run the outline campaign for the Democratic candidate Bernie Sanders from San Diego, said it really took off in March 2016.

"In a 30-day period, dozens of full-blown sites appeared overnight, running full level productions posts. It screamed out to me that something strange was going on," Mattes said. Much of the material was untraceable, but he tracked 40 percent of the new postings back to eastern Europe.

In fact, publicly available interviews with Mattes make this clear, such as this NBC 7 interview in which Mattes explains what led him to look into the troll activity in the first place.

"Hundreds and hundreds of people were joining Bernie Sanders pages on Facebook for a campaign that was over. It made no sense," he told the network.

I spoke to Mattes, who confirmed as much.

"I did not do that, at all," he said about the claim that he looked into troll activity on pro-Sanders pages during the primaries. "Anybody who says that I knew what was happening in March 2016 is misconstruing what I've said publicly."

Mattes, who says he was never consulted by MSNBC about Melber's use of his quote, adds that he has "not seen any reporting that there was material assistance that would have helped" Sanders during the primaries. While he does say that he found Sanders page administrators around the country complaining about fake news sites being posted on their pages, that was in May, and was largely haphazard. The trolls didn't appear to target California, for instance, even though it was clear by at least mid-May that the state was the Sanders's campaign's last hope.

"Had there been an outrageous blasting of Hillary Clinton on our Facebook pages in the outrageous manner that occurred after the convention, I would've noticed it," says Mattes. "If the Russians had really wanted to help Bernie, our last stand was in California, and I didn't see it."

As of the time of writing, Melber's segment is still available for viewing online on the MSNBC website, even though Mattes says he contacted MSNBC to register his objections regarding the misquote. I reached out to Melber and MSNBC and asked them if they plan on issuing a public retraction. This story will be updated with their response.

It appears, then, that the widespread claim that "the Russians" were helping Sanders's campaign, and did so during the primaries, is fake news -- much like the kind that those advancing this narrative accuse the Kremlin of spreading to subvert American democracy.

What appears to have happened here is a marked collapse of basic journalistic standards. Various news outlets and pundits have created a narrative about Russian material support for left-wing presidential candidates based on precisely three references in a thirty-seven-page document that don't actually provide evidence of such a thing. Ari Melber, meanwhile, misattributed and misrepresented a quote from a year-old article and never bothered to speak to the individual he was supposedly quoting -- all for the purposes of quickly and falsely debunking Sanders's defense of his campaign.

A less charitable interpretation is that the media -- unfriendly towards Sanders, uncritical of the national security establishment, and predisposed to run sensational stories about Russian interference -- ran headfirst into a story that seemed to be an ideal blend of these two trends, facts be damned.

Who's Next?
The widespread adoption of this narrative as a cudgel wielded against prominent left-wing political figures, often by liberals, shows the danger of the current political climate, in which liberal anchors openly speculate whether their political opponents are foreign agents. The moment such accusations are turned leftward is never far away.

Look at what's happening in the Mexican presidential race. The current front-runner is a left-wing, anti-Trump populist running on a platform promising to renegotiate NAFTA, establish a universal pension, pump billions into infrastructure spending, and undo the current president's privatization of gas and oil fields. One Bloomberg op-ed charged he would be an ideal beneficiary of a Putin-backed disinformation campaign. Another, this time at the Washington Post, asserted that Putin "may" be working to help him, an unsupported charge repeated by one of his opponent's aides in January.

Those hostile to left-wing causes have also made use of the accusation of Russia meddling. Texas Republican Lamar Smith, a man saturated with the fumes of fossil fuel industry money, has accused anti-fracking environmental groups and Facebook ads of being funded by the Kremlin. Others have also hyped up the work of Russian troll farms in promoting black activism and the Dakota Access Pipeline protests. It brings to mind the intelligence assessment released by the Directorate of National Intelligence last January, which, in lieu of detailing evidence for the Russian hacking of the DNC, instead cited Russia Today's coverage of US wealth inequality, police brutality, mass surveillance, corruption, fracking, and more as examples of Russian propaganda.

And in the future, such attacks can easily be turned on the liberals now weaponizing Russiagate. What would happen if and when a Kremlin-backed disinformation campaign appeared to come to the aid of the Democrats in a future election? It's not so far-fetched: the legal analysis website Law & Crime recently reported that the pundit most retweeted by the trolls indicted by Robert Mueller was MSNBC's very own Joy-Ann Reid, who received around ten times more retweets than Sanders from the same trolls. It remains to be seen if news outlets will claim that Reid was being "helped" by the Russian disinformation campaign, or if Ari Melber will ask for her to renounce their aid.

Liberals should be wary of continuing to use Russiagate for partisan purposes, and of abandoning reporting standards to punish their ideological challengers, whether consciously or not. Weapons, after all, have a way of getting into other people's hands.

kurt -> Christopher H.... , February 22, 2018 at 09:51 AM
Oh lookie - the troll found someone who wrote an article with sketchy references that ignores evidence - but he posted it because he agrees with it!
Eric377 , February 21, 2018 at 12:40 PM
Employers have spent a lot of effort understanding their processes in greater and greater detail over the past 25 years. "Labor productivity" is very, very gross measure and does not have much meaning to the employer. What exactly in the process is generating improvements and can an employee effectively withhold their contribution to the improvement are key questions that are pursued very aggressively. If the new layout of the fabrication cells drives a lot of extra productivity or if a redesign of the product itself increases producibility, the human labor in the process is not going to be compensated very much regardless of the aggregate shift in labor productivity. If you can hire someone out of a fast food restaurant and hit the 95% productivity target by the close of his/her first shift, well the incumbent worker in the position is not going to be getting a big slice of general productivity measures. On the whole, firms are assessing situations accurately and taking actions that are in their profit interests. If they were getting this wrong a lot they would make changes. Employers are usually very pragmatic and if higher compensation makes them more money, they do not hesitate. But it usually does not make them more money.
Christopher H. said in reply to Eric377... , February 21, 2018 at 06:20 PM
"Employers are usually very pragmatic and if higher compensation makes them more money, they do not hesitate."

LMAO

This is not the case at all.

Longtooth , February 22, 2018 at 02:22 AM
I don't know whether other commenters have already made this observation, but in case they haven't:

The paper can be summarized by the relationship of median wage growth to productivity growth as the sum of two variables A & B:

c(3)W = c(1)A + c(2)B

where c(i) are the coefficients of the relations of each term to productivity growth.

What the authors implied is that c(1) is positive and c(2) is negative by a much greater absolute value than c(1), resulting in a very low but positive c(3).

For this to be the case, then variable B must be the composite weighted sum of all factors besides those with positive coefficients included in A.

The authors did not identify those factors the sum of which are B.

But, that identification only matters to identify what if any of those factors can be adjusted, eliminated, or substantially modified. And since they are each related to Productivity growth but still sum to a composite weighted negative coefficient c(2) they must adjustable, or eliminatable, or modifiable such that in composite the coefficient c(2) sums to near zero.

The simple fact that the coefficient of B has increasingly become more negative over time strongly suggests that many or most or even all of these factors that sum to B may not in fact be adjustable, eliminatable, or modifiable to any appreciable degree, since otherwise they would have already been identified and adjustments, etc. made (1973 to 2018 is nearly two generations of time).

In other words the coefficients of factors B that sum to c(2) must clearly also have strong positive weighted coefficients that relate to other than productivity growth but which are each still related to productivity growth.

It is obvious then that the other relationships (non-productivity growth) of factors B weigh positively (since 1973 and increasingly so since then) far more than those that sum to coefficients c(2) which only relate to productivity growth.

Simply stated the other relationships of B to non-productivity growth terms have had increasingly greater priority than those related to productivity growth .. enough so to fully counteract them at an increasingly greater rate with time.

I submit that Summers et.al. know this already and even what the major drivers are, but intentionally left them in their Posted "economics" as unknowns to keep from upsetting the apple cart.

Longtooth , February 22, 2018 at 02:49 AM
"This divergence between productivity and the typical worker's pay is a relatively recent phenomenon.."

Only if you consider 46 years (1973 to 2018) "recent". Most economists would reject that assertion. Most non-economists would reject that assertion. Most laypersons would reject that assertion.

So on what basis can Summers et.al. possibly assert it as true?

The period since the end of WWII completely changed global and domestic economies and that period is 73 years of time, so that the most recent 45 years comprises 61% of it or well over half the period since WWII's end has been in effect.

Basically the most recent 45 years begins a few short years after LBJ's administration and the Nixon's failed admin -- but which was followed by Ford, Carter, and Reagan's.

Longtooth -> Longtooth... , February 22, 2018 at 02:59 AM
I'm not indicting the presidential administrations only using them to show that "recent" begins in the post LBJ / Nixon time-frame. I don't know anybody that would refer to Nixon's presidency as a "recent" administration, including me (and I was born in 1945). My 40 something offspring and their cousins and all their friends refer to that as "ancient history". Summers was born nearly a decade after I was, and so must be using a hugely different concept of "recent" than I do or than my children and their generation do.

Historians have a different concept of "recent" since their operating time frames cover at least from the Industrial revolution and more often than not several centuries more.

RC AKA Darryl, Ron , February 22, 2018 at 03:23 AM
"On the link between US pay and productivity" is more a matter of the link between Anna Stansbury and Larry Summers than a matter of analytical elegance. OTOH, Anna is quite elegant.
Christopher H. , February 22, 2018 at 05:51 AM
https://www.bloomberg.com/news/articles/2018-02-22/fed-staff-pondered-inflation-puzzle-and-came-away-none-the-wiser

Fed Staff Pondered Inflation Puzzle and Came Away None the Wiser
By Matthew Boesler
February 22, 2018, 12:00 AM EST

Former Federal Reserve Chair Janet Yellen has called low inflation a bit of a "mystery." So it was appropriate that at her final Fed meeting, she and her colleagues received a special briefing on what had gone wrong with the computer models they use to forecast price pressures.

The conclusion of the briefing: The models aren't great for forecasting, but alternative options aren't obvious either. Perhaps even more troubling for policy makers is that inflation appears to be anchored below the Fed's 2 percent target.

The presentations by Fed staff economists were described in the minutes of the policy-setting Federal Open Market Committee's Jan. 30-31 meeting published Wednesday. The failure to anticipate last year's decline in inflation, despite a tightening labor market, was chalked up to transitory factors like a one-time drop in the price of cell-phone services.

No alternative frameworks for understanding inflation beyond the Fed's reliance on the decades-old Phillips Curve relationship -- which relies on the level of the unemployment rate and household inflation expectations -- were uncovered.

"The staff found little compelling evidence for the possible influence of other factors such as a more competitive pricing environment or a change in the markup of prices over unit labor costs," according to the minutes of the gathering, which took place just before Jerome Powell succeeded Yellen as chairman. "The prediction errors in recent years were larger than those observed during the 2001-07 period but were consistent with historical norms."

On one hand, the findings arm Fed officials with ammunition in the debate about whether inflation will pick up again this year as unemployment remains low. "Almost all" FOMC participants continued to see the Phillips Curve relationship between unemployment and inflation as a useful guide, according to the minutes, which reinforces the case for gradually raising interest rates even with relatively slow price increases.

But the news was not all good.

"Two of the briefings presented findings that the longer-run trend in inflation, absent cyclical disturbances or transitory fluctuations, had been stable in recent years at a little below 2 percent," according to the minutes.

Evans Dissent
The findings echoed a concern that led Chicago Fed President Charles Evans to dissent against the FOMC's most recent rate hike in December. After that meeting, he explained his decision on the grounds that U.S. households' expectations for inflation may have fallen below 2 percent, which may make it harder for actual inflation to rise.

Fed officials' preferred inflation gauge has been below 2 percent throughout most of the last six years. Prices rose 1.7 percent in the 12 months through December, according to the Commerce Department index.

But in the discussion among FOMC participants that followed the briefings, there was no indication that Evans's concerns were becoming more widespread, despite the staff's findings. Only "a few" said inflation expectations appeared to have fallen below 2 percent, though "a number" noted the importance of stressing the symmetric nature of the Fed's inflation goal.

RGC , February 22, 2018 at 06:24 AM
Dorian Bon reviews a collection of essays by socialist authors and journalists, many of them SW contributors, that asks tough questions about Trumpism--and answers them.

...............................................

Trump and the crisis that caused him

...................................

"In 2008, Obama rode a wave of popular enthusiasm into the White House. "Two years later," Selfa writes, "the formerly discredited and out-of-touch Republican Party scored a historic landslide in the 2010 midterm election. In the largest congressional midterm victory since 1938, the Republicans captured sixty-three seats, ending the four-year Democratic majority in the House of Representatives."

"How did this happen? When Obama took office two years before, with the Democrats controlling both houses of Congress, his administration quickly proceeded to appoint Bush-era officials to top positions in the Treasury and Pentagon.

The fiscal stimulus law passed weeks after Obama's inauguration, while significant, excluded jobs programs to ease rising unemployment. The administration imposed sweeping concessions on unionized workers through the auto industry bailout, even while corporate executives continued to be rewarded with lavish payoffs.

As the business elite found a willing partner in the new White House, poll after poll showed that Americans had begun to associate Obama and the Democratic Party with big finance."

...........................................................

https://socialistworker.org/2018/02/16/trump-and-the-crisis-that-caused-him

[Feb 23, 2018] The Rothschild Organ And Octoputin - Projection or Envy

Feb 23, 2018 | www.moonofalabama.org

ger | Feb 22, 2018 11:40:39 AM | 2

In an uninformed America, fake news organization like NYT, Wapo and Economist can peddle fake news about fake news with nary a question of its accuracy. A dangerous time for the world. MORONS R/U$

A P , Feb 22, 2018 11:50:18 AM | 3

"I care not what puppet is placed on the throne of England to rule the Empire, ... The man that controls Britain's money supply controls the British Empire. And I control the money supply."
Baron Nathan Mayer Rothschild

Bearing mind that the US Federal Reserve is a private consortium of Rothschild-linked banks and it was another Rothschild that basically wrote the Balfour Declaration...

"Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority." Lord Acton

Add in Zimbardo (Stanford Prison Experiment) and Milgram (Shock Experiments) revealing how the influence machine operatesand you have the schema behind what passes for crony capitalism that infests the world. The icing on the oligarchic system is Bernays-inspired propaganda.

Perfect storm.

james , Feb 22, 2018 12:03:16 PM | 4
well octopi are very intelligent as i understand it.. so they got that right!

i agree with @2 ger and @3 A P.. this constant mantra to get russia is a real interesting set up if you ask me... someone hopes to make a ton of money off war.... these same people don't care about the death of others either... not pretty..

test , Feb 22, 2018 12:05:26 PM | 5
Sigh, nothing but racism against Russians, MSM really wants ww3 with Russia and unfortunately they will probably get it if their hatred, hysteria soar coming months, years.

As b said earlier this week, all for the click-bait.

Also,
Woman threatened online after CNN publicly confronts her on her porch for "siding with Russian trolls"
https://www.scoopnest.com/user/RT_com/966693158724792320-woman-threatened-online-after-cnn-publicly-confronts-her-for-siding-with-russian-trolls

James lake , Feb 22, 2018 12:22:27 PM | 6
Russiagate is the means the USA are using to manufacture consent for war.

A war that is not based on any real cause - just the Neo cons agenda. That is what the Meuller enquiry is designed to with the cooperation of the media - to make Americans hate Russia enough for war to be on the agenda

Putin is demonised - like with Saddam Hussein and Bin Laden and Ghaddafi

It started with obama and the demonisation of Putin.

Hillary was meant to continue this - Trump (Macmasters, Haley, Tillerson and the gang) are following the plan set out by the Neo-cons.

The question is will Europe follow - the UK and France and Poland may the Baltic's are dumb enough but I am not so sure about the rest of Europe.

golom , Feb 22, 2018 12:29:46 PM | 7
Octopus ist a Symbol like any other, depicting for example methods of surveilance states. If Sueddeutsche got attacked for using nazi symbolism, this is mosty due to the strong influence of zionist groups in germany, showing off on their power. Bruce schneier likely confirms this, even he though he uses a slightly different symbol: the squid.
test , Feb 22, 2018 12:38:16 PM | 8
James lake


"The question is will Europe follow - the UK and France and Poland may the Baltic's are dumb enough but I am not so sure about the rest of Europe".

Unfortunately you are misinformed, the anti-russian hatred is probably worse in europe than in america. Remember economist is a brittish/european news magazine.

Jo Garcia , Feb 22, 2018 12:40:16 PM | 9
Who most likely resembles an octopus, and acts more likely as one, is George Soros. Have never seen his likeness mocked in any publication. It is far overdue.
psychohistorian , Feb 22, 2018 1:12:19 PM | 10
This is amazing Big Lie projection by the elite. It shows their current weakness when they project their ability onto others as b clearly shows.....has private banking been reeled in since 1894 or has it grown to project more power and control?

Please remember folks that it is our social contract that needs to change rather than punish some individuals and leave finance in private hands. Have we "evolved" enough to be able to manage finance as a public utility? Like with gun (aggression) control, if we can get some adults to lead the discussion and evolution instead of the psychopaths leadership we have currently, there shouldn't be a problem.

hopehely , Feb 22, 2018 1:32:37 PM | 11
Posted by: test | Feb 22, 2018 12:38:16 PM | 8
the anti-russian hatred is probably worse in europe than in america. Remember economist is a brittish/european news magazine.

Not in whole Europe. In Southern/Mediterranean Europe for example you do not find hatred towards Russia. And how much Britain is European anyways, they call us 'continentals' after all.
ben , Feb 22, 2018 1:37:30 PM | 12
james @ 4 said:"i agree with @2 ger and @3 A P.. this constant mantra to get russia is a real interesting set up if you ask me... someone hopes to make a ton of money off war.... these same people don't care about the death of others either... not pretty.."

Couldn't have said it any better james, kudos...

bevin , Feb 22, 2018 1:37:56 PM | 13
The picture of Putin as meddling octopus attacking democracies is of course dumb nonsense. There is no evidence that the Russian government was in any way involved in the U.S. election..."
No evidence either that the US, where electors choose between Trump and Clinton, Democrat neo-cons and republican neo-cons, is a democracy.
Perhaps The Economist is re-cycling Karl Marx's old, 1848, charge against 'that power, whose head is in Moscow and whose hand is in every cabinet in Europe' a charge that today fits the arbiter of all wannabe, whose head is in Washington. to a tee.
Skeletor , Feb 22, 2018 2:17:34 PM | 14
@ B

The link to the NYT article is broken....or more likely they have removed the article.

Good reporting as always above. Thank you.

Anonymous , Feb 22, 2018 2:44:10 PM | 15
"well octopi are very intelligent as i understand it.. so they got that right!" James @4

They are also very good at spraying black ink indiscriminately in order to make their escape or mask their presence.

test , Feb 22, 2018 2:57:53 PM | 16
hopehely

I cant see any difference between southern states like Spain, France vs northern like Holland and Norway.
The media is even more hawkish than the folks also.

jo6pac , Feb 22, 2018 3:15:34 PM | 17
No comment needed. Enjoy.

https://www.mintpressnews.com/hillary-clinton-begs-forgiveness-rothschilds-leaked-email/221570/

jo6pac , Feb 22, 2018 3:17:04 PM | 18
Another one because I'm having fun.

https://www.globalresearch.ca/hillary-clintons-intimate-relationship-with-the-rothschild-banking-dynasty-the-shadowy-network-of-super-elites/5542966

This is a nice piece of the German journalist Norbert Häring about Soros:

http://norberthaering.de/de/27-german/news/67-das-inet-von-george-soros-instrument-zur-weltverbesserung-oder-trojanisches-pferd-der-finanzoligarchie

He carefully sorted out what seems to be fact and what is gossip. Alt right people here hate this approach.

Hausmeister , Feb 22, 2018 3:26:09 PM | 19


This is a nice piece of the German journalist Norbert Häring about Soros:
http://norberthaering.de/de/27-german/news/67-das-inet-von-george-soros-instrument-zur-weltverbesserung-oder-trojanisches-pferd-der-finanzoligarchie
He carefully sorted out what seems to be fact and what is gossip. Alt right people here hate this approach.
augusto , Feb 22, 2018 3:59:21 PM | 20
The famous british weather forecast in never a past thing: ", ladies & gentelment a heavy thick mist this morning covers the Channel, thus isolating the European continent...''
mauisurfer , Feb 22, 2018 4:18:30 PM | 21
Haus
Here it is in english
http://norberthaering.de/en/32-english/news/944-soros-inet
psychohistorian , Feb 22, 2018 4:49:58 PM | 22
@ mauisurfer with the english translation of the Soros and INET piece....Thanks!

Most of my undergraduate study was in macro economics which showed the myth behind the religion of private finance/property and ongoing inheritance. I was one of the folks in class that asked too many questions and would never get invited to an INET gathering but was a computer nerd by then anyway.

The point that struck me about the situation is that to overturn private finance also means dealing with the excesses of patriarchy ....sigh We are a species that has advanced amazingly so in so many ways and yet here we are with a multi-century pattern of private finance controlling the lifeblood of human commerce like a vampire. This may have made some sense in the feudal era but we are past that aren't we?

I hope we don't destroy ourselves trying to evolve.

Lester , Feb 22, 2018 5:02:21 PM | 23
Putin works for the Rothschilds. Putin is the bankers' faithful employee. Putin was just a low-level KGB member and suddenly he becomes Russia's president? Just like Obama the unknown became the US president?

http://www.conspirazzi.com/tag/jewish-mother/

http://vladimirsuchan.blogspot.com.tr/2016/01/who-rules-russia-its-system-is-set-up.html?m=1

karlof1 , Feb 22, 2018 5:21:15 PM | 24
And before the Octopus there was the Hydra and its related mythology .

In one sense it's certainly projection. I imagine the text is full of falsifications and allegations offered with no facts to back them, which is what we've seen from all other media and linked governments. Clearly, Russia is seen as an easier target than China thanks to the years of Cold War brainwashing. But when we're confronted with such excrement, what's the message we see being sent? I see an elaborate Ponzi Scheme built on a slowly disintegrating foundation of lies in the process of imploding. The so-called Masters of the Universe no longer hold any Truths and must thus rely on their seemingly infinite lies broadcast via the Propaganda System. Meanwhile, The Resistance holds all the Truths and refutes the lies easily. The Resistance rapidly gains the credibility the Masters once wielded.

The Hydra in Greek Mythology is killed in several differing ways. But the most important aspect of its being is the reason for its existence: Hera raised it specifically to kill Heracles--it's a tool of the Elite made to kill one of the Elite's main challengers. Yet, it was a member of the Elite--Athena--who provides Heracles with the ultimate weapon to slay the Hydra. Yes, Truth is stranger than Fiction; and it must be recalled that Mythology always is constructed around a core of Truth.

Formerly T-Bear , Feb 22, 2018 5:31:30 PM | 25
@ psychohistorian | Feb 22, 2018 4:49:58 PM | 22

What? No cognitive dissonance? Look closely again! Rothschild is exactly what your "Private Finance" looks like. I would have thought you would highly approve. Are you sure you took Economics 101? or just had a bad reaction to a pizza?

Ivan , Feb 22, 2018 7:24:46 PM | 26
It is interesting that the host "b", who is scrupulous about anti-semitic biases, has now to acknowledge at least tangentially that the anti-semites got some things right. The anti-semites may have gone overboard with their accusations, but as always there is a kernel of truth. The Jewish opinion-makers have no sense of moderation, or fairplay and that has always turned off anyone who thinks about these things. I myself have turned away from being a raging 110% Zionist to total indifference now.
Don Bacon , Feb 22, 2018 8:24:11 PM | 27
Whose tentacles control the world?
From the Iran Deputy FM on the nuclear deal :
The world will be plunged into a new nuclear crisis if Donald Trump continues to sabotage the Iran nuclear deal, the country's deputy foreign minister has warned. Abbas Araghchi, a deputy foreign minister, accused Mr Trump's administration of violating the agreement by threatening to reimpose sanctions and said Tehran could walk away from the deal if it did not begin to see economic benefits from the deal.

" I don't think the deal can survive in this way, if the atmosphere of confusion continues, if companies or banks will not cooperate with Iran . We cannot stay in a deal in which there is no benefit for us," he said. "That's a fact." . . . here

countries that are parties to the JCPOA--
China
European Union
France
Germany
Iran
Russian Federation
United Kingdom
United States .. .The meddler

So Trump, not Putin, menaces Western democracies. Change the head on that octopus.

che , Feb 22, 2018 8:29:40 PM | 28
U.S. Mainstream news television and print has become boring predicable relentless propaganda nonsense, pure hype. Half is pure hype propaganda and the other is mostly advertisement selling products like pharmaceuticals any news item is product placement, LOL. It is Frightening at the same time hard to believe that the American Public is still falling for the same shell game, evil dictator, etc. This Defraud of the American Public, relentless and diabolical misinformation mind control, and Mr. Obama and his ilk insist they will decide what is true or not, fake news or not. And they will marginalize criminalize or physically damage the outliers.
saul alilinsky sachscoburg gotha , Feb 22, 2018 8:37:18 PM | 29
i live on rothschild street it is very nice and safe already no arab spring here as we removed them and sent them to munchen,garmischpartenkirken,scotland,wales london and norway sweden barbera lerner spector sorted the shipping out for us super better thsn dhl logistics already.


"The great Ideal of Judaism is ...that the whole world shall be imbued with Jewish teachings, and that in a Universal Brotherhood of Nations - a greater Judaism, in fact -- all the separate races and religions [and nations] shall disappear."

https://www.henrymakow.com/

Grieved , Feb 22, 2018 8:44:32 PM | 30
@24 karlof1

Mythology contains its core of truth because, I submit, events and symbols both arise from the same source, and share the same pattern.

In plain terms: we are too self-important to think we put the connections together. The connections come already made, we just ascertain them.

In useful terms: the mythologies contain patterns of existence that remain alive even if we only see the patterns from mythologies that owe their fame to past events. Whatever a story evokes, it also invokes. It can happen again because it never went away. The pattern is universal, enduring, primordial. Plus ca change...

And your Hydra story is wonderful. And hopeful :)

Jen , Feb 22, 2018 9:03:50 PM | 31
Karlofi @ 24: In a way, the Hydra did kill Heracles (the mortal part of him). Heracles shot a centaur who was menacing his second wife Deianira with one of his arrows (which he had previously dipped in the Hydra's blood). The centaur told Deianira to dip a shirt into his blood (the centaur's blood, that is), falsely claiming that his blood could be used as a love potion. Some time in the future, Heracles' eye starts to wander and Deianira remembers the centaur's last words. She gives Heracles the bloodstained shirt to wear. The Hydra poison in the shirt starts killing Heracles and he cannot take it off.
Debsisdead , Feb 22, 2018 9:23:13 PM | 32
It is vital to acknowledge that animus towards zionists is culturally driven rather than racially motivated. Saturday morning Hebrew classes - frequently instructed by fresh outta the IDF young israelis, has been an essential part of the indoctrination of jews into zionism. Without that it would have been impossible to develop the cohort of fervently pro-Israeli jews. Wind the clock back 5 or 6 decades and you will find that among the wider jewish population zionists were outnumbered by a mixture of secular jews who wanted integration and those orthodox jews who believed zionism to be contrary to established teaching. Not now.
However there is another major downside to the accepted indoctrinations. Spend time with a third generation arab american, italian- american or Greek-american and you will find that aside from the surname they appear just as any amerikan would. Not so for Amerikan jews, whose brainwashing has served to seperate them from the wider population.
This is particularly apparent in attitudes towards women. Over the early years of emigration to the "New World" there have been numerous instances of recent migrants from Italy Greece and the ME being involved in some dreadful activities against local women. Now, these have frequent been used by a racist media to persuade fools that the particular nationality in question is deviant, violent and will 'steal our womenfolk'. After a couple decades of local Italian-amerikans, Greek-amerikans and Arab-amerikans it all settles down into a crime rate within the usual boundaries of citizens.

That hasn't prevented race-baiting by third generation feminists, the worst example being englander Labour Party MP Sarah Champion claiming that all muslims were misogynist after a gang of 1st & 2nd generation Pakistani-englanders were convicted of grooming 'young white girls'. The link which certainly doesn't represent my view on this gives a flavour of how the englander media published racist tropes while pretending to be opposed to racism.

I mention the Champion case because one group of englanders and amerikans are always given a free pass on sexism, even though they, unlike descendants of xtian and islamic immigrants, continue with their belief in gender based oppression into all subsequent generations of amerikans.

Take a look at the primary perpetrators in the #ME TOO tweeting? Harvey Weinstein, Woody Allen, Roman Polanski to name a tiny percentage of the Hollywood "heavy Hitters" who have been accused of sexual harassment and/or rape and who happen to be Jews.
I have always held that the combination of "we are the chosen people" rhetoric combined with the "all goy women are easy" [I mean to say married goyim don't even wear a sheitel ) nonsense has encouraged jews to hang on to gender based prejusices long after the societies which other migrants came from ditched such tosh.

Yet there have been no articles on the rate of Judaism amongst sex pests and rapists. Why not?

I'm not highlighting this because I reckon the world needs more racist propaganda, but because a well-researched article which considered all the issues properly could put these 'hebrew classes' that let's face it, are the judaic equivalent of wahabi Madrasa brainwashing, under pressure to reform the curriculum away the anti-=women, anti-islam - hell anti anyone/anything which isn't judaic- and into less socially divisive anti-hate speech stuff.

Looking at any of the problems across this rock in 2018 with a race-based mindset is wasteful and untrue. amerikans of all colours and creeds cheer on the destruction of the 'undeveloped' world not because of their hair or skin colour, but because they have had their minds filled with garbage ever since someone first turned on a vid tube to 'distract' them.

hopehely , Feb 22, 2018 9:51:48 PM | 33
Posted by: Ivan | Feb 22, 2018 7:24:46 PM | 26
to acknowledge at least tangentially that the anti-semites got some things right.

What things?
I myself have turned away from being a raging 110% Zionist to total indifference now.

What happened? Moved to Israel and didn't like it there? Too quiet on Saturdays?

[Feb 23, 2018] Life in the Sweatbox, Personal Bankruptcy, and the Narrative of Utilitarian Calculus by Lambert Strether

Notable quotes:
"... The Importance of Being Earnest ..."
"... By Lambert Strether of Corrente . ..."
"... Notre Dame Law Review ..."
Feb 22, 2018 | www.nakedcapitalism.com
"Really, if the lower orders don't set us a good example, what on earth is the use of them? They seem, as a class, to have absolutely no sense of moral responsibility." –Oscar Wilde, The Importance of Being Earnest

By Lambert Strether of Corrente .

Credit Slips informs us of an important new study, "Life in the Sweatbox," by Pamela Foohey, Robert M. Lawless, Katherine M. Porter, and Deborah Thorne, forthcoming from the Notre Dame Law Review , and available for download now at SSRN . Foohey summarizes the article:

"Sweatbox" refers to the financial sweatbox -- the time before people file bankruptcy, which is when they often are on the brink of defaulting on their debts and lenders can charge high interest and fees. In the article, we focus on debtors' descriptions of their time in the sweatbox.

Based on CBP data, we find that people are living longer in the sweatbox before filing bankruptcy than they have in the past. Two-thirds of people who file bankruptcy reported struggling with their debts for two or more years before filing. One-third of people reported struggling for more than five years, double the frequency from the CBP's survey of people who filed bankruptcy in 2007. For those people who struggle for more than two years before filing -- the "long strugglers" -- we find that their time in the sweatbox is marked by persistent debt collection calls, the loss of homes and other property, and going without healthcare, food, and utilities. And although long strugglers do not file bankruptcy until long after the benefits outweigh the costs, they still report being ashamed of needing to file.

Foohey concludes:

Our results suggest that the bankruptcy system, at present, cannot deliver its promised "fresh start" to many of the families that seek its protection.

In this brief post, I'll look at one aspect of how the bankruptcy system came to be as it is: The narrative that debtors perform a "utilitarian calculus" in deciding whether or not to seek bankruptcy. This narrative is false, based the results of "Life in the Sweatbox." Since it will crop up again if bankruptcy reform efforts gain traction -- as they should -- it's important to debunk it now. This subject matter is new to me, so I will primarily quote from and contextualize Foohey, Lawless, Porter, and Thorne.

First, let's define the "sweatbox.' Foohey et al., page 1:

The time before a person files bankruptcy is sometimes called the financial "sweatbox." People in the financial sweatbox are on the brink of defaulting on their debts, which is when their lenders can charge high interest rates and fees and otherwise profit from their customers' financial misery.

Ka-ching.

Although the term "sweatbox" often is connected with bankruptcy, how long people spend in the sweatbox before filing and what it means to live in the sweatbox has yet to be carefully examined. Understanding what people endure while in the sweatbox is crucial to evaluating the longstanding belief that people decide to file bankruptcy based on a strategic, financial calculation.

Second, current personal bankruptcy law is premised on the narrative that people seek personal bankruptcy out of self-interest (the "utilitarian calculus"). Foohey et al., page 2:

The term "financial sweatbox" came out of the debates leading to the 2005 passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a major amendment to the Bankruptcy Code designed to decrease consumer bankruptcy filings by making filing more difficult, expensive, and timeconsuming. The consumer credit industry insisted that changes to bankruptcy were needed because bankruptcy courts were full of deadbeat, "can-pay" debtors who filed "bankruptcies of convenience" to try to escape their rightful obligations and who felt no shame in "abusing" the system. This story contradicted the overwhelming expert consensus that the bankruptcy system functioned well, abuse was rare, and there was no need for drastic overhaul.

And from page 12:

To make its case for restricting access to bankruptcy and thus extend the time consumers spend in the sweatbox, the consumer credit industry painted a picture of profligate spending and uninhibited use of bankruptcy. This picture was not new. Rather, it was updated and embellished for more than a decade. Proponents of this picture argued that reforms were necessary because the "rising tide of bankruptcy filings" cost every moral, bill-paying family $400 a year, a figure that made for "the best sound-bite in the debate." Proponents further linked people's supposed propensity to file at the first sign of financial trouble to a purported drastic decline in bankruptcy's stigma.

None of proponents' claims were supported by evidence . Proponents never substantiated the often-cited "fact" that bankruptcy was costing every American family $400 a year. The claim that bankruptcy courts were filled with "can-pay" debtors was contradicted by decades of robust empirical evidence that people file bankruptcy after experiencing exogenous shocks, such as decline in income, increased expenses, job loss, divorce, and medical problems. Based on this evidence, the related claim that bankruptcy's stigma had disappeared became suspect. If anything, comparing levels of consumer debt and the number of bankruptcy filings, the stigma of filing may have increased over past decades.

Nonetheless, lured by tales of a $400 bankruptcy "tax," Congress embraced the consumer credit industry's assertion that restricting eligibility to and otherwise making it harder to file bankruptcy was the best policy.

(The politics of bankruptcy legislation, it seems, make the politics of health care law look like deliberations at Aristotle's Lyceum .) So now you have been inocculated against the talking points from the credit "industry" (so-called), especially that virulent "$400 a year" one. I'm about to give the article's internal logic on why these talking points are false, but the article is lavishly footnoted and you can run down plenty of additional material for yourself.

Third, the struggle to avoid bankruptcy involves immense suffering. Page 39:

To squeeze a few more dollars out of their lives, people work overtime, forego basic necessities, face serious health consequences, deal with persistent debt collection calls, end up in court, lose homes, and sell what little they own .

Financial misery hurts families. For couples, financial distress is "complicated by the internal dynamic of the household." Struggling with unmanageable debts can strain marriages and relationships. Fights over how to make ends meet, shifting of responsibilities for dealing with ever-worsening finances, and watching loved ones deal with the emotional distress that comes with money troubles may lead to separation and divorce. Splitting one household into two only worsens the financial problems .

For parents, financial troubles are compounded with worries over how the kids cope with the hardships. If homes are foreclosed, children are displaced along with their parents, and may switch schools, possibly more than once as their parents find a workable living situation. Home loss is linked with educational regression. Even if children are not displaced, they notice their parents' financial distress. Schedules change, diets change, and activities are scaled back as parents cut spending. Such changes can confuse children, resulting in behavioral and emotional problems. The effects of prolonged financial problems extend beyond families to workplaces and communities. Existing in a state of money scarcity damages people's ability to lead productive lives. Merely determining how one will survive day to day depletes people's mental resources. This leaves little energy for attending to anything else, including one's job, threatening people's livelihoods and leading to further economic drain. People withdraw from society, adding to their isolation. And the costs of life in the sweatbox are magnified by people's reported underutilization of health-related services and insurance, which can permanently harm people's health.

(The article does not mention Case-Deaton's "deaths of despair," but I'm sure all these hellish stressors have measurable health effects; see NC's discussion of "embodiment." )

Fourth, many prolong the struggle to avoid bankrupcty long after it's in their interest to do so. Page 3:

[T]wo-thirds of people who file bankruptcy report that they seriously struggled with their debts for more than two years prior to bankruptcy. Almost one-third report that they seriously struggled for more than five years, double the frequency from the CBP's survey of people who filed bankruptcy in 2007. For those people who struggle for more than two years before filing bankruptcy -- the "long strugglers" -- their time in the sweatbox is particularly damaging, distinguishing them from other debtors. They lose their homes to foreclosure, sell other property, report going without food and other necessities, all while employing multiple tactics to try to make ends meet and dealing with persistent debt collection calls and lawsuits. When long strugglers finally file, they enter bankruptcy with fewer assets than other debtors and overwhelming unsecured debts. Long strugglers would have benefitted financially from filing months or years before they did . Yet seven out of ten long strugglers say they felt shame upon filing bankruptcy. These debtors' reports about their prebankruptcy lives suggest a model of deciding to file based on something beyond just dollars and cents .

Finally and finally, QED. Debtors, especially long strugglers, cannnot be presumed to perfom a "utilitarian calculus." Page 42:

Debtors' presumed utilitarian calculation that underlies debates about access to bankruptcy supposes more knowledge about law and shrewdness about timing than our data suggest people have. People's willingness to file is diminished further by feelings of shame about using bankruptcy even when filing is clearly financially beneficial. Combined, the bankruptcy system is severely hampered in delivering the fresh start it is assumed to bestow on struggling families.

And from page 38:

Far from being a first resort, bankruptcy is the last refuge for struggling families, and their decisions to file do not reflect the utilitarianism bankruptcy law .

At this point, I'm thinking that the situation in bankruptcy is so hellish that that loveable goof, Joe Biden, actually did student debtors a favor by not allowing them to file for it [hollow laughter].

It also occurs to me that since it's not obvious that our elites are likely to feel shame, and it's quite obvious that they're adept at utilitarian calculus (ka-ching), perhaps they're projecting their own values and behavior onto the rest of us?

This is an excellent article, far richer in data, ideas, and policy concepts than I've sought to convey here. Recommended reading . Grab a cup of coffee!

[Feb 07, 2018] Capitalism Collapsing from Inequality... Blame Russia! by Finian CUNNINGHAM

Nov 11, 2017 | www.strategic-culture.org

New figures published this week on obscene inequality show how the capitalist economic system has become more than ever deeply dysfunctional. Surely, the depraved workings of the system pose the greatest threat to societies and international security. Yet, Western leaders are preoccupied instead with other non-existent threats – like Russia.

Take British prime minister Theresa May who this week was speaking at a posh banquet in London. She told the assembled hobnobs, as they were sipping expensive wines, that "Russia is threatening the international order upon which we depend". Without providing one scrap of evidence, the British leader went to assert that Russia was interfering in Western democracies to "sow discord".

May's grandstanding is a classic case study of what behavioral scientists call "displacement activity" – that is, when animals find themselves in a state of danger they often react by displaying unusual behavior or making strange noises.

For indeed May and other Western political leaders are facing danger to their world order, even if they don't openly admit it as such. That danger is from the exploding levels of social inequality and poverty within Western societies, leading to anger, resentment, discontent and disillusionment among increasing masses of citizens. In the face of the inherent, imminent collapse of their systems of governance, Western leaders like May seek some relief by prattling on about Russia as a threat.

This week European bank Credit Suisse published figures showing that the wealth gap between rich and poor has reached even more grotesque and absurdist levels. According to the bank, the world's richest 1% now own as much wealth as half the population of the entire planet. The United States and Britain are among the top countries for residing multi-millionaires, while these two nations have also emerged as among the most unequal in the world.

The data calling out how dysfunctional the capitalist system has become keeps on coming. It is impossible to ignore the reality of a system in deep disrepair, yet British and American politicians in particular – apart from notable exceptions like Jeremy Corbyn and Bernie Sanders – have the audacity to block out this reality and to chase after risible phantoms. (The exercise makes perfect sense in a way.)

Last week, a report from the US-based Institute of Policy Studies found that just three of America's wealthiest men – Bill Gates, Jeff Bezos and Warren Buffett – own the same level of wealth as the poorest half of the entire US population. That is, the combined monetary worth of these three individuals – reckoned to be $250 billion – is equivalent to that possessed by 160 million citizens.

What's more, the study also estimates that if the Trump administration pushes through its proposed tax plans, the gap between rich elite and the vast majority will widen even further. This and other studies have found that over 80% of the tax benefits from Trump's budget will go to enrich the top 1% in society.

All Western governments, not just May's or Trump's, have over the past decades overseen an historic trend of siphoning wealth from the majority of society to a tiny elite few. The tax burden has relentlessly shifted from the wealthy to the ordinary workers, who in addition have had to contend with decreasing wages, as well as deteriorating public serves and social welfare.

To refer to the United States or Britain as "democracies" is a preposterous misnomer. They are for all practical purposes plutocracies; societies run by and for a top strata of obscenely wealthy.

Intelligent economists, like the authors at the IPS cited above, realize that the state of affairs is unsustainable. Morally, and even from an empirical economics point of view, the distortion of wealth within Western societies and internationally is leading to social and political disaster.

On this observation, we must acknowledge the pioneering work of Karl Marx and Friedrich Engels who more than 150 years ago identified the chief failing of capitalism as being the polarization of wealth between a tiny few and the vast majority. The lack of consumption power among the masses owing to chronic poverty induced by capitalism would result in the system's eventual collapse. Surely, we have reached that point in history now, when a handful of individuals own as much wealth as half the planet.

Inequality, poverty and the denial of decent existence to the majority of people stands out as the clarion condemnation of capitalism and its organization of society under private profit. The human suffering, hardships, austerity and crippled potential that flow from this condition represent the crisis of our time. Yet instead of an earnest public debate and struggle to overcome this crisis, we are forced by our elites to focus on false, even surreal problems.

American politics has become paralyzed by an endless elite squabble over whether Russia meddled in the presidential elections and claims that Russian news media continue to interfere in American democracy. Of course, the US corporate-controlled news media, who are an integral part of the plutocracy, lend credibility to this circus. Ditto European corporate-controlled media.

Then we have President Donald Trump on a world tour berating and bullying other nations to spend more money on buying American goods and to stop cheating supposed American generosity over trade. Trump also is prepared to start a nuclear war with North Korea because the latter is accused of being a threat to global peace – on the basis that the country is building military defenses. The same for Iran. Trump castigates Iran as a threat to Middle East peace and warns of a confrontation.

This is the same quality of ludicrous distraction as Britain's premier Theresa May this week lambasting Russia for "threatening the world order upon which we all depend". By "we" she is really referring to the elites, not the mass of suffering workers and their families.

May and Trump are indulging in "perception management" taken to absurdity. Or more crudely, brainwashing.

How can North Korea or Iran be credibly presented as global threats when the American and British are supporting a genocidal blockade and aerial slaughter in Yemen? The complete disconnect in reality is testimony to the pernicious system of thought-control that the vast majority of citizens are enforced to live under.

The biggest disconnect is the obscene inequality of wealth and resources that capitalism has engendered in the 21 st century. That monstrous dysfunction is also causally related to why the US and its Western allies like Britain are pushing belligerence and wars around the planet. It is all part of their elitist denial of reality. The reality that capitalism is the biggest threat to humanity's future.

Do we let these mentally deficient, deceptive political elites and their media dictate the nonsense? Or will the mass of people do the right thing and sweep them aside?

[Jan 16, 2018] Angry Bear " Does the United States Have A "Poland Problem"

Notable quotes:
"... As it is, the "middle" 59% can replenish their pockets at the expense of top 1% income whose share has ballooned from 10% to 22.5% over recent (de-unionizing) decades. Just reintroduce confiscatory taxation of the kind existing in the Eisenhower era. Say, 90% over $2 million income -- and this time we really mean it -- very top incomes (CEOs, news anchors, er, quarterbacks) now 20X what they were since per capita income only doubled. I predict any social inertia (it's only human nature) on the part of the 59% to jack upper taxes up will be overcome by the friendly persuasion on the part of the 40% -- who want to jack up the price of that burger just a bit more. ..."
"... NY Times' Nate Cohn found that Trump won by trading places with Obama. Obama ran as the black guy (presumably working folks oriented -- were we wrong) against Wall Street Romney; Trump ran as blue collar-acting guy against Wall Street Hillary. True progressive Bernie would have stomped Trump. (Bernie hasn't caught on to re-stocking union density as the only real way to help working people yet -- but at least he won't get in the way while waiting to catch on.) ..."
"... I remember reading an interview of an older person. The interviewer asked what life was like during the Great Depression. And they replied that it wasn't bad if you had a job. ..."
"... This is similar to our situation today. It is not bad if you have a good paying full time job. In that case you have almost no understanding of what some others are complaining about. Income inequality is a sterile term for what happens to other people ..."
"... Candidate Trump addressed the major concern of those 'others', which was their declining spending power. He did that by addressing the economic threats posed by illegal immigration and free trade treaties which allowed companies to move production overseas. ..."
"... The businessman Mohamed El-Erian rejects the populist label for the current multi national voter rebellions, he prefers anti-establishment. And so do I. ..."
Jan 16, 2018 | angrybearblog.com

Denis Drew, January 11, 2018 10:25 am

"We all know that that the widely touted unemployment rate overstates the strength of the labor market given so many having dropped out of the labor force, and upward pressure on wages has remained weak, despite some improvement on that front recently."

Barkley, this understates (too typically I'm afraid) the depth of the "Great Wage Depression." Everybody (everybody progressive anyway) eternally points to economic growth benefiting only the upper few percent for decades -- then -- whenever they assess the effect of the economy upon voters (not you here) they skip right over sink hole wage rates and keyhole focus right on the unemployment rate (or if we're lucky the real employment rate) when what voters want is $20/hr jobs plain and simple: high (or at least really livable) wages.

[cut-and-paste]
Simply put, if fast food can pay $15/hr at 33% (!) labor costs, then, other retail should be able pay $20/hr at 10-15% labor costs, and, Walmart (God bless it) may be able to pay $25/hr at 7% labor costs. If this means shifting 10% of overall income to the bottom 40%, that means scratching 14% of their income from the "middle" 59% (who get roughly 70% of overall income) -- in higher prices. Which may mean we have been paying the 40% too little for too along. But if the 40% get labor union organized (where this little speech is going) we may find ourselves willing to up if we want them to show up at work.

I have always been willing to tell any gang banger (not that I ever run into any) that side-ways guns and gang signs and all that would look pretty funny in, say, Germany where they pay people to work. And, that if Walmart were paying $25/hr we wouldn't be hearing about any of this here.

As it is, the "middle" 59% can replenish their pockets at the expense of top 1% income whose share has ballooned from 10% to 22.5% over recent (de-unionizing) decades. Just reintroduce confiscatory taxation of the kind existing in the Eisenhower era. Say, 90% over $2 million income -- and this time we really mean it -- very top incomes (CEOs, news anchors, er, quarterbacks) now 20X what they were since per capita income only doubled. I predict any social inertia (it's only human nature) on the part of the 59% to jack upper taxes up will be overcome by the friendly persuasion on the part of the 40% -- who want to jack up the price of that burger just a bit more.

* * * * * *

Super easy way back [ONLY WAY BACK] is restoring healthy labor union density (6% unions outside gov equates to 20/10 bp). When Democrats take over Congress, we must institute mandatory union certification and re-certification elections at every work place (stealing a page from the Republican's anti-union playbook -- see Wisconsin gov workers). I would add the wrinkle of making the cycle one, three or five years -- plurality rules -- take a lot of potential rancor out of first time votes in some workplaces.

Why Not Hold Union Representation Elections on a Regular Schedule?
November 1st, 2017 – Andrew Strom
https://onlabor.org/why-not-hold-union-representation-elections-on-a-regular-schedule/

WHICH IS WHERE I CAME INTO THIS MOVIE

PS. NY Times' Nate Cohn found that Trump won by trading places with Obama. Obama ran as the black guy (presumably working folks oriented -- were we wrong) against Wall Street Romney; Trump ran as blue collar-acting guy against Wall Street Hillary. True progressive Bernie would have stomped Trump. (Bernie hasn't caught on to re-stocking union density as the only real way to help working people yet -- but at least he won't get in the way while waiting to catch on.)

JimH , January 11, 2018 10:39 am

First, I agree with your assessment that President Trump is claiming credit for things which he has not caused. But this economy is awful for those at the low end of the income scale. Low pay, high rent, and rising food costs. (Sometimes by subterfuge.)

I remember reading an interview of an older person. The interviewer asked what life was like during the Great Depression. And they replied that it wasn't bad if you had a job.

This is similar to our situation today. It is not bad if you have a good paying full time job. In that case you have almost no understanding of what some others are complaining about. Income inequality is a sterile term for what happens to other people.

And others, like all of the above, who see the prices of the things that they consume going up while the CPI is showing little inflation.

Some of those others live in the rust belt states where they have seen an extended economic decline.

Neither of the two major political parties addresses those 'others' issues. And because they are almost completely disconnected from their voters' issues, they did not perceive the building anger.

Candidate Trump addressed the major concern of those 'others', which was their declining spending power. He did that by addressing the economic threats posed by illegal immigration and free trade treaties which allowed companies to move production overseas.

President Trump lost in the polls and won the election. It doesn't really surprise me that he is continuing to score low in the polls.

Of course, the two major parties can continue on their current paths. And they can blame their losses on flawed voters. And eventually they will do their complaining from their homes.

The businessman Mohamed El-Erian rejects the populist label for the current multi national voter rebellions, he prefers anti-establishment. And so do I.

Varsovian , January 11, 2018 12:14 pm

Oh no, not another extrapolation based on the false economic stats Poland pumped out pre-2015!!

No-one takes the drastic choice of emigration lightly – especially if you know you're going to be bottom of the heap in the new country. Can't you find an American to talk about his forbears escaping poverty in Europe only to face hard times in the New World?

Two million Poles fled Poland's much touted "Economic Miracle". Funnily, they stopped emigrating when REAL economic growth, wage growth and the setting up of a welfare state started!

Hard Right crony capitalism with illegal fuel import deals with Putin and falsified public accounting didn't cause happiness. Despite the figures, Poland wasn't a world leader in the export of cellphones, for example.

Rosser continues to bark up the wrong tree! Worse – he's making some sort of social philosophy out of it.

Barkley Rosser , January 11, 2018 3:28 pm

Denis and Jim,

Generally agree.

Dave V.,

You and I have already been around on this, but I shall point out that the credibility of sources in Poland that you like to cite have collapsed since the Law and Justice Party you shill for took over.

The most believable data is that there has been no major economic change in the state of the Polish economy from before and after the political change, although some minor changes (which you have hyped while ignoring others not fitting your party line). The big bottom line is no noticeable change in overall GDP growth in Poland, basically chugging along unspectacularly in the 1-2% annual range with mild quarterly fluctuations.

So, sorry, I am going to stick with calling this the Poland problem." You folks are the poster boys for this. Tough, and good luck getting any world leader not also an authoritarian liar supporting your embarrassing government.

[Dec 28, 2017] Working Class w- No Living Wage The Absurd Math of US Income

Notable quotes:
"... less than $100 ..."
"... the International Institute for Sustainable Development ..."
"... gross domestic product ..."
"... GDP ..."
"... employment-rate ..."
"... gross national income ..."
"... (total employed) × (mean-average wages per-year) = 140,400,040 × $49,630 = $6,968,053,985,200 or ..."
"... ~$7 trillion ..."
"... managers, janitors, lawyers, nurses, librarians, bartenders, and everyone else who had a job in 2016 ..."
"... Total US Income = $18,750,000,000,000 Combined Wages & Salaries of All Employed Folks = $6,968,053,985,200 Income from Federal Social Benefits = $2,039,300,000,000 ..."
"... Total Income - (Wages & Salaries + Benefits) = $9,763,546,014,800 ..."
"... every commodity ..."
"... every last grain ..."
"... every waste bin ..."
"... every single cappuccino ..."
"... Property income ..."
"... unearned income ..."
"... interest ..."
"... interest, rent, and corporate profits ..."
"... with ..."
"... just as valuable ..."
"... honest work ..."
"... In solidarity, John Laurits ..."
"... If you enjoy these posts, consider buying the writer a cup of coffee ..."
"... or making a monthly donation ..."
"... --  it's like a voluntary subscription directly to an artist & journalist ..."
"... I'm all about it! ..."
Dec 28, 2017 | extranewsfeed.com

Working Class w/ No Living Wage: The Absurd Math of US Income

As the stock market gleefully claws its way to more record-breaking highs, Forbes reports a full 56% of US Americans now have less than $1,000 to their names  --  and 25% have less than $100 . But the economy, as they say, is booming. Even with 165 million on the breadline and an hourly minimum wage of only $7.25 nationally, surging Amazon share prices have added $13 billion to Jeff Bezos' net-worth since mid-September. For perspective, $13 billion is enough to pay the student-loan debts of 432,000 millennials. It's also plenty to end world hunger for a year, according to the International Institute for Sustainable Development . And Bezos  --  now the world's richest man  --  smashes a bottle of organic champagne to celebrate his new wind-farm. The question is  --  how do markets grow as the wealth of the people shrinks and wages fall? What do the commentariat mean by "economic growth" when the nation's income can hardly keep half of its people's heads above water?

The National Income:
How Much Value is Created by the US Economy?

There are a lot of ways to measure economies  --  for example, gross domestic product or GDP is the value of everything a country produces ( minus the cost to produce it ) and the employment-rate measures the number of paying jobs. The gross national income or GNI is what you get after adding up all of the income earned by everyone. GNI includes every citizen ( even in other countries ) and every kind of income from wages or salaries to social security and unemployment benefits, investment returns, or the sale of assets like houses and cars.

GNI is basically the total value of all money paid to everyone, minus the expenses of doing the business everyone is getting paid for. According to the macroeconomic accounts on the Federal Reserve's website, the GNI was about $18.7 trillion dollars in 2016 for the US.

Gross National Wages:
Every Paycheck Combined

Now, how much of America's multi-trillion-dollar paycheck ends up in the pockets of people who work in the US? Since the "gross national wage" is apparently not as important to US media-outlets as Jeff Bezos' latest earnings or the many triumphs of the Dow Jones, this number is a bit more camouflaged. Luckily, the total number who are employed by all industries and their average wages or salaries can be found in the bowels of the Bureau of Labor Statistics' website. Multiplying these two numbers  --  the total employed by all industries and their mean-average yearly wages  --  gives the combined wages and salaries of everyone with a job in the US, from the clerks and mechanics to the brain-surgeons and corporate executives.

(total employed) × (mean-average wages per-year) =
140,400,040 × $49,630 = $6,968,053,985,200 or
~$7 trillion

$7 trillion dollars to split between all employed people in the United States. Everyone who built everything and provided every service  --   managers, janitors, lawyers, nurses, librarians, bartenders, and everyone else who had a job in 2016   --  collectively earned about $7 trillion of the $18.7 trillion national paycheck.

But who gets the remaining $11,781,946,014,800?

Federal Benefits & Social Welfare

The national income also includes money received from government benefits, such as disability, retirement, and social security. The Bureau of Labor Statistics lists the 2016 total federal benefits received at $2.0393 trillion.

Total US Income = $18,750,000,000,000
Combined Wages & Salaries of All Employed Folks = $6,968,053,985,200
Income from Federal Social Benefits = $2,039,300,000,000
Total Income - (Wages & Salaries + Benefits) = $9,763,546,014,800

And about $9.8 trillion is still missing.

Literally All Working People Combined
Earn Less Than Half of American Income

According to the BLS data, there are an estimated 146 million people who hold some sort of job in the US. These 146 million workers create every commodity , serve every meal , harvest every last grain , empty every waste bin , teach every student , build every house , and pour milk into every single cappuccino in the nation. And together they take about 37.2% of the American pie. All of the so-called "handouts" from the federal government  --  social security, retirement, disability, and other benefits  --  only amount to another 10.8% of the GNI.

The combined income from all employment and federal benefits still only adds up to 48% of America's paycheck. And that means that the other 52% must be paid to someone  --  or some thing   --  without a job.

Unearned Income: Landlords, Industrial Capitalists, & Wall Street Investors

Property income   --  or, as the classical economists knew it, unearned income   --  is earned through ownership ( rather than wages , which are earned by time spent working ). There are three basic types of unearned income. Rent is paid to owners of land or other natural resources, profit is paid to owners of capital ( like factories, equipment, machines, etc. ), and interest is paid to owners of financial assets ( like stocks, securities, debt, etc. ). The $13 billion Jeff Bezos made when Amazon share prices increased, for example, was "earned" by owning something rather than creating something or providing some service.

This type of income is a bit harder to keep track of  --  especially considering that the wealthy seem to be in the habit of using offshore tax-havens and shell companies ( like those revealed in the Panama and Paradise Papers ) to stash their fortunes. With that being said, the US Department of Commerce's accounts show nearly $7 trillion   --  or about the same as 146 million working people made combined  --  paid out for interest, rent, and corporate profits . Another trillion and a half or so was paid to "proprietors" or, more colloquially, the owners.

And now we have a rough sketch of the great American paycheck:

Are Workers Worthy of Their Wages?
Not in the United States of America!

There are two basic components to the whole economic activity and wealth of human civilization  --   capital and labor . On one hand there is capital  --  all of the natural resources, materials, lands, machines, and everything that everything is made of and made with   --  and, on the other hand, there are the countless workers whose labor-power transforms that stuff into the societies we live in.

Without the time, energy, creativity, and sacrifices made by the 146 million human beings who make everything and offer every service, the wealth of people like Jeff Bezos would not exist. Business magnates like Jeff Bezos, Warren Buffet, and Bill Gates need working classes  --  working classes do not need them . And yet Bezos, Buffet, and Gates now possess more wealth than the bottom 50% of the nation combined. Through the prism of the American economy, people like Bezos, Buffet, and Gates are just as valuable as the poorest 160 million of the working classes who collectively labor billions of hours each week.

And that is unfair  --   that doesn't add up. The "American Dream"  --  the whole idea about how anyone willing to work hard should be able to prosper or, at the very least, make ends meet  --  is objectively untrue . The truth is  --  if you want to earn wealth in the US or even if you only want to earn enough to pay the bills on time  --   honest work is not a very good strategy.

In solidarity,
John Laurits

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    the same political rants you see on Facebook, but they're well written.

  • More on Bernie Sanders from Extra Newsfeed The Day the Russians made Donna Brazile expose Hillary Clinton & the Democratic Party Go to the profile of CharliePeach🍑 CharliePeach🍑 Related reads 7 Effective Communication Techniques That Will Make You Excellent Go to the profile of Karim Elsheikh Karim Elsheikh Also tagged Politics Don't Count America Out Go to the profile of John McCain John McCain Responses Conversation between Martha Menard, PhD and John Laurits . Go to the profile of Martha Menard, PhD Martha Menard, PhD Dec 6

    Interesting article, John. I work for a financial tech company that provides personal financial planning to employees as part of their benefits package. A lot of people are struggling  --  about 80% of Americans live paycheck to paycheck, 50% of people can't handle a $500 unexpected expense without putting it on a credit card, and about 33% have saved 1 response Go to the profile of John Laurits John Laurits Dec 6


    Yes! Thank you for mentioning unpaid domestic labor, as well as the roles that racism and patriarchy play in the awful saga of inequality  --  these are more than crucial to any real class analysis. My biggest regret about this article is that I was unable to include a discussion of unpaid domestic labor and how it contributes to the greater picture of Conversation with John Laurits . Go to the profile of LaMar Going LaMar Going Nov 30


    I am weary of half-truths, lies and ignorance from writers like this.
    3 responses Go to the profile of John Laurits John Laurits Nov 30

    1. False dichotomy. Option C: In the haste of your search for some technicality to use in your attempt at attacking the article's credibility, you did not consider that the second half of my casual description of GDP as "value of everything a country produces minus the cost to produce it" refers to the exclusion of the value of intermediate goods 2 responses Conversation between Joshua Shepard and John Laurits . Go to the profile of Joshua Shepard Joshua Shepard Dec 1


    Great breakdown! This is something I could see myself busting out with some investigative reporting. You took the macro budget and broke it down into the major segments and the makeup of each segment  --  wouldn't it be a great college project to have students across the country further breakdown each segment, using tools to find the inefficiencies? We 1 response Go to the profile of John Laurits John Laurits Dec 7


    Hi! Thanks & I'm glad you found the article useful :)

    In response to your question about what I think about using tech to hold them accountable, I say  --  : I'm all about it! In my humble (yet frequently accurate) opinion, one of Marx's most important insights about how revolutionary change occurs was his description of new Conversation between Joe Psotka and John Laurits . Go to the profile of Joe Psotka Joe Psotka Dec 5


    I would like to see how this comparison of GNI into capital and wages has changed historically, and how it might continue to change with automation overwhelming us.

    However, I can't agree completely that the capitalists do nothing to merit their work. They too should be paid wages, just not the obscene one that they get now 1 response Go to the profile of John Laurits John Laurits Dec 5


    I'll be writing about automation and the US workweek in my next post :) And to clarify my position  --  as a Marxist libertarian-socialist, I have zero problems with the idea of people accumulating wealth created by their own efforts/labor (which I'd roughly define as the sacrifice of a person's time to create value). When Bezos or any human being 1 response Applause from John Laurits (author) Go to the profile of Allyson Saad Allyson Saad Nov 29


    Substantive piece. Applause from John Laurits (author) Go to the profile of Elsie Brown Elsie Brown Dec 6 interest is paid to owners of financial assets ( like stocks, securities, debt, etc. ). The $13 billion Jeff Bezos made when Amazon share prices increased, for example, was "earned" ...


    Those who own enough money get paid just for holding onto it. That seems deeply wrong. If money could decay in some way no one would hoard it. You'd rather have someone owe you $100 than have $100 in your pocket. 3 responses Conversation with John Laurits . Go to the profile of Regina Bash-Taqi Regina Bash-Taqi Dec 6


    Good information but I don't agree with your description of 'honest' work. The world is changing, so we all need to change with it. There will always be people who are ahead of the curve such as Gates, Bezos and Buffet, but I believe if all of us change our game -- we'll get our share and things will shift. 1 response Go to the profile of John Laurits John Laurits Dec 6


    So your solution is for the vast majority of the world's population, the working poor, to just 'change [their] game?' Applause from John Laurits (author) Go to the profile of alex carter alex carter Dec 2


    Great article. This is boiling up to some kind of a head.

    In other words, Got Guillotine? Conversation with John Laurits . Go to the profile of Rod Ruger Rod Ruger Dec 6


    If someone has an idea for a product or service and employs members of the working class to implement that idea, what portion of the resulting income does the dude with the idea get? No ideas/innovation means a stone age existence. 1 response Go to the profile of John Laurits John Laurits Dec 6


    Intellectual labor is totally a thing and people ought to be paid for doing that as well  --  and I'm curious as to which part of the post led you to think I might advocate withholding compensation from creatives, inventors, or idea-people? The BLS statistics I use in the post include everyone who sacrifices time from the 24 hours they all have each day Conversation with John Laurits . Go to the profile of Sceptical Meerkat Sceptical Meerkat Dec 9


    Why would somebody me pay more for an American worker if one can hire a Mexican illegal immigrant? 1 response Go to the profile of John Laurits John Laurits Dec 9


    Yeah, I'm sure the economic system will somehow result in a different and better outcome if we can only find a way to oppress the poorer, browner workers a bit more 1 response Go to the profile of Sceptical Meerkat Sceptical Meerkat Dec 9 Yeah, I'm sure the economic system will somehow result in a different and better outcome if we can only find a way to oppress the poorer, browner workers a bit more


    Depends better for whom.

    The low qualified qualified workers' wages are undercut by competition from cheaper immigrant workers, so they will win if immigration is controlled while would be immigrant will lose.

    Just wishful thinking and empty talk about the need to increase wagers from people who don't pay those wages is meaningless. 1 response Go to the profile of John Laurits John Laurits Dec 9


    Just wishful thinking and empty talk about the need to increase wagers from people who don't pay those wages is meaningless.

    Yep, that's what Czar Nicholas II kept thinking, too 1 response Conversation with John Laurits . Go to the profile of Rick Fischer Rick Fischer Dec 9


    Mr. Laurits slips a few things past us in all his details. His "worth it" criterion is a valid one, in my opinion. Income from doing something that is of value to society does make the income "worth it". (I'm really over-simplifying here. Try not to search too hard for some exception or other.) 1 response Go to the profile of John Laurits John Laurits Dec 9


    You wrote:

    "His descriptions of the red slice, about half the total income, are skimpy, and his examples leave the reader with the vague feeling that that half is not "worth it". Which I surmise is his intent. But it's not entirely true; mostly not true, in fact."

    [Dec 25, 2017] American Carnage by Brad Griffin

    Notable quotes:
    "... It tells me that the bottom line is that Christmas has become a harder season for White families. We are worse off because of BOTH social and economic liberalism which has only benefited an elite few. The bottom half of the White population is now in total disarray – drug addiction, demoralization, divorce, suicide, abortion, atomization, stagnant wages, declining household income and investments – and this dysfunction is creeping up the social ladder. The worst thing we can do is step on the accelerator. ..."
    Dec 24, 2017 | www.unz.com

    As we move into 2018, I am swinging away from the Republicans. I don't support the Paul Ryan "Better Way" agenda. I don't support neoliberal economics. I think we have been going in the wrong direction since the 1970s and don't want to continue going down this road.

    1. Opioid Deaths: As we all know, the opioid epidemic has become a national crisis and the White working class has been hit the hardest by it. It is a "sea of despair" out there.
    2. White Mortality: As the family crumbles, religion recedes in his life, and his job prospects dwindle, the middle aged White working class man is turning to drugs, alcohol and suicide: The White suicide rate has soared since 2000:
    3. Median Household Income: The average household in the United States is poorer in 2017 than it was in 1997:
    4. Real GDP: Since the late 1990s, real GDP and real median household income have parted ways:
    5. Productivity and Real Wages: Since the 1970s, the minimum wage has parted ways with productivity gains in the US economy:
    6. Stock Market: Since 2000, the stock market has soared, but 10% of Americans own 80% of stocks. The top 1% owns 38% of stocks. In 2007, 3/4th of middle class households were invested in the stock market, but now only 50% are investors. Overall, 52% of Americans now own stocks, which is down from 65%. The average American has less than $1,000 in their combined checking and savings accounts.

    Do you know what this tells me?

    It tells me that the bottom line is that Christmas has become a harder season for White families. We are worse off because of BOTH social and economic liberalism which has only benefited an elite few. The bottom half of the White population is now in total disarray – drug addiction, demoralization, divorce, suicide, abortion, atomization, stagnant wages, declining household income and investments – and this dysfunction is creeping up the social ladder. The worst thing we can do is step on the accelerator.

    Paul Ryan and his fellow conservatives look at this and conclude we need MORE freedom. We need lower taxes, more free trade, more deregulation, weaker unions, more immigration and less social safety net spending. He wants to follow up tax reform with entitlement reform in 2018. I can't but see how this is going to make an already bad situation for the White working class even worse.

    I'm not rightwing in the sense that these people are. I think their policies are harmful to the nation. I don't think they feel any sense of duty and obligation to the working class like we do. They believe in liberal abstractions and make an Ayn Rand fetish out of freedom whereas we feel a sense of solidarity with them grounded in race, ethnicity and culture which tempers class division. We recoil at the evisceration of the social fabric whereas conservatives celebrate this blind march toward plutocracy.

    Do the wealthy need to own a greater share of the stock market? Do they need to own a greater share of our national wealth? Do we need to loosen up morals and the labor market? Do we need more White children growing up in financially stressed, broken homes on Christmas? Is the greatest problem facing the nation spending on anti-poverty programs? Paul Ryan and the True Cons think so.

    Yeah, I don't think so. I also think it is a good thing right now that we aren't associated with the mainstream Right. In the long run, I bet this will pay off for us. I predict this platform they have been standing on for decades now, which they call the conservative base, is going to implode on them. Donald Trump was only the first sign that Atlas is about to shrug.

    (Republished from Occidental Dissent by permission of author or representative)

    [Dec 22, 2017] Beyond Cynicism America Fumbles Towards Kafka s Castle by James Howard Kunstler

    Highly recommended!
    Notable quotes:
    "... With the election of 2016, symptoms of the long emergency seeped into the political system. Disinformation rules. There is no coherent consensus about what is happening and no coherent proposals to do anything about it. The two parties are mired in paralysis and dysfunction and the public's trust in them is at epic lows. Donald Trump is viewed as a sort of pirate president, a freebooting freak elected by accident, "a disrupter" of the status quo at best and at worst a dangerous incompetent playing with nuclear fire. A state of war exists between the White House, the permanent D.C. bureaucracy, and the traditional news media. Authentic leadership is otherwise AWOL. Institutions falter. The FBI and the CIA behave like enemies of the people. ..."
    "... They chatter about electric driverless car fleets, home delivery drone services, and as-yet-undeveloped modes of energy production to replace problematic fossil fuels, while ignoring the self-evident resource and capital constraints now upon us and even the laws of physics -- especially entropy , the second law of thermodynamics. Their main mental block is their belief in infinite industrial growth on a finite planet, an idea so powerfully foolish that it obviates their standing as technocrats. ..."
    "... The universities beget a class of what Nassim Taleb prankishly called "intellectuals-yet-idiots," hierophants trafficking in fads and falsehoods, conveyed in esoteric jargon larded with psychobabble in support of a therapeutic crypto-gnostic crusade bent on transforming human nature to fit the wished-for utopian template of a world where anything goes. In fact, they have only produced a new intellectual despotism worthy of Stalin, Mao Zedong, and Pol Pot. ..."
    "... Until fairly recently, the Democratic Party did not roll that way. It was right-wing Republicans who tried to ban books, censor pop music, and stifle free expression. If anything, Democrats strenuously defended the First Amendment, including the principle that unpopular and discomforting ideas had to be tolerated in order to protect all speech. Back in in 1977 the ACLU defended the right of neo-Nazis to march for their cause (National Socialist Party of America v. Village of Skokie, 432 U.S. 43). ..."
    "... This is the recipe for what we call identity politics, the main thrust of which these days, the quest for "social justice," is to present a suit against white male privilege and, shall we say, the horse it rode in on: western civ. A peculiar feature of the social justice agenda is the wish to erect strict boundaries around racial identities while erasing behavioral boundaries, sexual boundaries, and ethical boundaries. Since so much of this thought-monster is actually promulgated by white college professors and administrators, and white political activists, against people like themselves, the motives in this concerted campaign might appear puzzling to the casual observer. ..."
    "... The evolving matrix of rackets that prompted the 2008 debacle has only grown more elaborate and craven as the old economy of stuff dies and is replaced by a financialized economy of swindles and frauds . Almost nothing in America's financial life is on the level anymore, from the mendacious "guidance" statements of the Federal Reserve, to the official economic statistics of the federal agencies, to the manipulation of all markets, to the shenanigans on the fiscal side, to the pervasive accounting fraud that underlies it all. Ironically, the systematic chiseling of the foundering middle class is most visible in the rackets that medicine and education have become -- two activities that were formerly dedicated to doing no harm and seeking the truth ! ..."
    "... Um, forgotten by Kunstler is the fact that 1965 was also the year when the USA reopened its doors to low-skilled immigrants from the Third World – who very quickly became competitors with black Americans. And then the Boom ended, and corporate American, influenced by thinking such as that displayed in Lewis Powell's (in)famous 1971 memorandum, decided to claw back the gains made by the working and middle classes in the previous 3 decades. ..."
    "... "Wow – is there ever negative!" ..."
    "... You also misrepresent reality to your readers. No, the black underclass is not larger, more dysfunctional, and more alienated now than in the 1960's, when cities across the country burned and machine guns were stationed on the Capitol steps. The "racial divide" is not "starker now than ever"; that's just preposterous to anyone who was alive then. And nobody I've ever known felt "shame" over the "outcome of the civil rights campaign". I know nobody who seeks to "punish and humiliate" the 'privileged'. ..."
    "... My impression is that what Kunstler is doing here is diagnosing the long crisis of a decadent liberal post-modernity, and his stance is not that of either of the warring sides within our divorced-from-reality political establishment, neither that of the 'right' or 'left.' Which is why, logically, he published it here. National Review would never have accepted this piece ..."
    "... "Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class -- which included a great many white Americans who used to be able to support a family with simple labor." ..."
    "... Young black people are told by their elders how lucky they are to grow up today because things are much better than when grandpa was our age and we all know this history.\ ..."
    "... It's clear that this part of the article was written from absolute ignorance of the actual black experience with no interest in even looking up some facts. Hell, Obama even gave a speech at Howard telling graduates how lucky they were to be young and black Today compared to even when he was their age in the 80's! ..."
    "... E.g. Germany. Germany is anything but perfect and its recent government has screwed up with its immigration policies. But Germany has a high standard of living, an educated work force (including unions and skilled crafts-people), a more rational distribution of wealth and high quality universal health care that costs 47% less per capita than in the U.S. and with no intrinsic need to maraud around the planet wasting gobs of taxpayer money playing Global Cop. ..."
    "... The larger subtext is that the U.S. house of cards was planned out and constructed as deliberately as the German model was. Only the objective was not to maximize the health and happiness of the citizenry, but to line the pockets of the parasitic Elites. (E.g., note that Mitch McConnell has been a government employee for 50 years but somehow acquired a net worth of over $10 Million.) ..."
    Dec 12, 2017 | www.theamericanconservative.com

    On America's 'long emergency' of recession, globalization, and identity politics.

    Can a people recover from an excursion into unreality? The USA's sojourn into an alternative universe of the mind accelerated sharply after Wall Street nearly detonated the global financial system in 2008. That debacle was only one manifestation of an array of accumulating threats to the postmodern order, which include the burdens of empire, onerous debt, population overshoot, fracturing globalism, worries about energy, disruptive technologies, ecological havoc, and the specter of climate change.

    A sense of gathering crisis, which I call the long emergency , persists. It is systemic and existential. It calls into question our ability to carry on "normal" life much farther into this century, and all the anxiety that attends it is hard for the public to process. It manifested itself first in finance because that was the most abstract and fragile of all the major activities we depend on for daily life, and therefore the one most easily tampered with and shoved into criticality by a cadre of irresponsible opportunists on Wall Street. Indeed, a lot of households were permanently wrecked after the so-called Great Financial Crisis of 2008, despite official trumpet blasts heralding "recovery" and the dishonestly engineered pump-up of capital markets since then.

    With the election of 2016, symptoms of the long emergency seeped into the political system. Disinformation rules. There is no coherent consensus about what is happening and no coherent proposals to do anything about it. The two parties are mired in paralysis and dysfunction and the public's trust in them is at epic lows. Donald Trump is viewed as a sort of pirate president, a freebooting freak elected by accident, "a disrupter" of the status quo at best and at worst a dangerous incompetent playing with nuclear fire. A state of war exists between the White House, the permanent D.C. bureaucracy, and the traditional news media. Authentic leadership is otherwise AWOL. Institutions falter. The FBI and the CIA behave like enemies of the people.

    Bad ideas flourish in this nutrient medium of unresolved crisis. Lately, they actually dominate the scene on every side. A species of wishful thinking that resembles a primitive cargo cult grips the technocratic class, awaiting magical rescue remedies that promise to extend the regime of Happy Motoring, consumerism, and suburbia that makes up the armature of "normal" life in the USA. They chatter about electric driverless car fleets, home delivery drone services, and as-yet-undeveloped modes of energy production to replace problematic fossil fuels, while ignoring the self-evident resource and capital constraints now upon us and even the laws of physics -- especially entropy , the second law of thermodynamics. Their main mental block is their belief in infinite industrial growth on a finite planet, an idea so powerfully foolish that it obviates their standing as technocrats.

    The non-technocratic cohort of the thinking class squanders its waking hours on a quixotic campaign to destroy the remnant of an American common culture and, by extension, a reviled Western civilization they blame for the failure in our time to establish a utopia on earth. By the logic of the day, "inclusion" and "diversity" are achieved by forbidding the transmission of ideas, shutting down debate, and creating new racially segregated college dorms. Sexuality is declared to not be biologically determined, yet so-called cis-gendered persons (whose gender identity corresponds with their sex as detected at birth) are vilified by dint of not being "other-gendered" -- thereby thwarting the pursuit of happiness of persons self-identified as other-gendered. Casuistry anyone?

    The universities beget a class of what Nassim Taleb prankishly called "intellectuals-yet-idiots," hierophants trafficking in fads and falsehoods, conveyed in esoteric jargon larded with psychobabble in support of a therapeutic crypto-gnostic crusade bent on transforming human nature to fit the wished-for utopian template of a world where anything goes. In fact, they have only produced a new intellectual despotism worthy of Stalin, Mao Zedong, and Pol Pot.

    In case you haven't been paying attention to the hijinks on campus -- the attacks on reason, fairness, and common decency, the kangaroo courts, diversity tribunals, assaults on public speech and speakers themselves -- here is the key take-away: it's not about ideas or ideologies anymore; it's purely about the pleasures of coercion, of pushing other people around. Coercion is fun and exciting! In fact, it's intoxicating, and rewarded with brownie points and career advancement. It's rather perverse that this passion for tyranny is suddenly so popular on the liberal left.

    Until fairly recently, the Democratic Party did not roll that way. It was right-wing Republicans who tried to ban books, censor pop music, and stifle free expression. If anything, Democrats strenuously defended the First Amendment, including the principle that unpopular and discomforting ideas had to be tolerated in order to protect all speech. Back in in 1977 the ACLU defended the right of neo-Nazis to march for their cause (National Socialist Party of America v. Village of Skokie, 432 U.S. 43).

    The new and false idea that something labeled "hate speech" -- labeled by whom? -- is equivalent to violence floated out of the graduate schools on a toxic cloud of intellectual hysteria concocted in the laboratory of so-called "post-structuralist" philosophy, where sundry body parts of Michel Foucault, Jacques Derrida, Judith Butler, and Gilles Deleuze were sewn onto a brain comprised of one-third each Thomas Hobbes, Saul Alinsky, and Tupac Shakur to create a perfect Frankenstein monster of thought. It all boiled down to the proposition that the will to power negated all other human drives and values, in particular the search for truth. Under this scheme, all human relations were reduced to a dramatis personae of the oppressed and their oppressors, the former generally "people of color" and women, all subjugated by whites, mostly males. Tactical moves in politics among these self-described "oppressed" and "marginalized" are based on the credo that the ends justify the means (the Alinsky model).

    This is the recipe for what we call identity politics, the main thrust of which these days, the quest for "social justice," is to present a suit against white male privilege and, shall we say, the horse it rode in on: western civ. A peculiar feature of the social justice agenda is the wish to erect strict boundaries around racial identities while erasing behavioral boundaries, sexual boundaries, and ethical boundaries. Since so much of this thought-monster is actually promulgated by white college professors and administrators, and white political activists, against people like themselves, the motives in this concerted campaign might appear puzzling to the casual observer.

    I would account for it as the psychological displacement among this political cohort of their shame, disappointment, and despair over the outcome of the civil rights campaign that started in the 1960s and formed the core of progressive ideology. It did not bring about the hoped-for utopia. The racial divide in America is starker now than ever, even after two terms of a black president. Today, there is more grievance and resentment, and less hope for a better future, than when Martin Luther King made the case for progress on the steps of the Lincoln Memorial in 1963. The recent flash points of racial conflict -- Ferguson, the Dallas police ambush, the Charleston church massacre, et cetera -- don't have to be rehearsed in detail here to make the point that there is a great deal of ill feeling throughout the land, and quite a bit of acting out on both sides.

    The black underclass is larger, more dysfunctional, and more alienated than it was in the 1960s. My theory, for what it's worth, is that the civil rights legislation of 1964 and '65, which removed legal barriers to full participation in national life, induced considerable anxiety among black citizens over the new disposition of things, for one reason or another. And that is exactly why a black separatism movement arose as an alternative at the time, led initially by such charismatic figures as Malcolm X and Stokely Carmichael. Some of that was arguably a product of the same youthful energy that drove the rest of the Sixties counterculture: adolescent rebellion. But the residue of the "Black Power" movement is still present in the widespread ambivalence about making covenant with a common culture, and it has only been exacerbated by a now long-running "multiculturalism and diversity" crusade that effectively nullifies the concept of a national common culture.

    What follows from these dynamics is the deflection of all ideas that don't feed a narrative of power relations between oppressors and victims, with the self-identified victims ever more eager to exercise their power to coerce, punish, and humiliate their self-identified oppressors, the "privileged," who condescend to be abused to a shockingly masochistic degree. Nobody stands up to this organized ceremonial nonsense. The punishments are too severe, including the loss of livelihood, status, and reputation, especially in the university. Once branded a "racist," you're done. And venturing to join the oft-called-for "honest conversation about race" is certain to invite that fate.

    Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class -- which included a great many white Americans who used to be able to support a family with simple labor. Hung out to dry economically, this class of whites fell into many of the same behaviors as the poor blacks before them: absent fathers, out-of-wedlock births, drug abuse. Then the Great Financial Crisis of 2008 wiped up the floor with the middle-middle class above them, foreclosing on their homes and futures, and in their desperation many of these people became Trump voters -- though I doubt that Trump himself truly understood how this all worked exactly. However, he did see that the white middle class had come to identify as yet another victim group, allowing him to pose as their champion.

    The evolving matrix of rackets that prompted the 2008 debacle has only grown more elaborate and craven as the old economy of stuff dies and is replaced by a financialized economy of swindles and frauds . Almost nothing in America's financial life is on the level anymore, from the mendacious "guidance" statements of the Federal Reserve, to the official economic statistics of the federal agencies, to the manipulation of all markets, to the shenanigans on the fiscal side, to the pervasive accounting fraud that underlies it all. Ironically, the systematic chiseling of the foundering middle class is most visible in the rackets that medicine and education have become -- two activities that were formerly dedicated to doing no harm and seeking the truth !

    Life in this milieu of immersive dishonesty drives citizens beyond cynicism to an even more desperate state of mind. The suffering public ends up having no idea what is really going on, what is actually happening. The toolkit of the Enlightenment -- reason, empiricism -- doesn't work very well in this socioeconomic hall of mirrors, so all that baggage is discarded for the idea that reality is just a social construct, just whatever story you feel like telling about it. On the right, Karl Rove expressed this point of view some years ago when he bragged, of the Bush II White House, that "we make our own reality." The left says nearly the same thing in the post-structuralist malarkey of academia: "you make your own reality." In the end, both sides are left with a lot of bad feelings and the belief that only raw power has meaning.

    Erasing psychological boundaries is a dangerous thing. When the rackets finally come to grief -- as they must because their operations don't add up -- and the reckoning with true price discovery commences at the macro scale, the American people will find themselves in even more distress than they've endured so far. This will be the moment when either nobody has any money, or there is plenty of worthless money for everyone. Either way, the functional bankruptcy of the nation will be complete, and nothing will work anymore, including getting enough to eat. That is exactly the moment when Americans on all sides will beg someone to step up and push them around to get their world working again. And even that may not avail.

    James Howard Kunstler's many books include The Geography of Nowhere, The Long Emergency, Too Much Magic: Wishful Thinking, Technology, and the Fate of the Nation , and the World Made by Hand novel series. He blogs on Mondays and Fridays at Kunstler.com .

    Whine Merchant December 20, 2017 at 10:49 pm

    Wow – is there ever negative!
    Celery , says: December 20, 2017 at 11:33 pm
    I think I need to go listen to an old-fashioned Christmas song now.

    The ability to be financially, or at least resource, sustaining is the goal of many I know since we share a lack of confidence in any of our institutions. We can only hope that God might look down with compassion on us, but He's not in the practical plan of how to feed and sustain ourselves when things play out to their inevitable end. Having come from a better time, we joke about our dystopian preparations, self-conscious about our "overreaction," but preparing all the same.

    Merry Christmas!

    Fran Macadam , says: December 20, 2017 at 11:55 pm
    Look at it this way: Germany had to be leveled and its citizens reduced to abject penury, before Volkswagen could become the world's biggest car company, and autobahns built throughout the world. It will be darkest before the dawn, and hopefully, that light that comes after, won't be the miniature sunrise of a nuclear conflagration.
    KD , says: December 21, 2017 at 6:02 am
    Eat, Drink, and be Merry, you can charge it on your credit card!
    Rock Stehdy , says: December 21, 2017 at 6:38 am
    Hard words, but true. Kunstler is always worth reading for his common-sense wisdom.
    Helmut , says: December 21, 2017 at 7:04 am
    An excellent summary and bleak reminder of what our so-called civilization has become. How do we extricate ourselves from this strange death spiral?
    I have long suspected that we humans are creatures of our own personal/group/tribal/national/global fables and mythologies. We are compelled by our genes, marrow, and blood to tell ourselves stories of our purpose and who we are. It is time for new mythologies and stories of "who we are". This bizarre hyper-techno all-for-profit world needs a new story.
    Liam , says: December 21, 2017 at 7:38 am
    "The black underclass is larger, more dysfunctional, and more alienated than it was in the 1960s. My theory, for what it's worth, is that the civil rights legislation of 1964 and '65, which removed legal barriers to full participation in national life, induced considerable anxiety among black citizens over the new disposition of things, for one reason or another."

    Um, forgotten by Kunstler is the fact that 1965 was also the year when the USA reopened its doors to low-skilled immigrants from the Third World – who very quickly became competitors with black Americans. And then the Boom ended, and corporate American, influenced by thinking such as that displayed in Lewis Powell's (in)famous 1971 memorandum, decided to claw back the gains made by the working and middle classes in the previous 3 decades.

    Peter , says: December 21, 2017 at 8:34 am
    I have some faith that the American people can recover from an excursion into unreality. I base it on my own survival to the end of this silly rant.
    SteveM , says: December 21, 2017 at 9:08 am
    Re: Whine Merchant, "Wow – is there ever negative!"

    Can't argue with the facts

    P.S. Merry Christmas.

    Dave Wright , says: December 21, 2017 at 9:22 am
    Hey Jim, I know you love to blame Wall Street and the Republicans for the GFC. I remember back in '08 you were urging Democrats to blame it all on Republicans to help Obama win. But I have news for you. It wasn't Wall Street that caused the GFC. The crisis actually had its roots in the Clinton Administration's use of the Community Reinvestment Act to pressure banks to relax mortgage underwriting standards. This was done at the behest of left wing activists who claimed (without evidence, of course) that the standards discriminated against minorities. The result was an effective repeal of all underwriting standards and an explosion of real estate speculation with borrowed money. Speculation with borrowed money never ends well.

    I have to laugh, too, when you say that it's perverse that the passion for tyranny is popular on the left. Have you ever heard of the French Revolution? How about the USSR? Communist China? North Korea? Et cetera.

    Leftism is leftism. Call it Marxism, Communism, socialism, liberalism, progressivism, or what have you. The ideology is the same. Only the tactics and methods change. Destroy the evil institutions of marriage, family, and religion, and Man's innate goodness will shine forth, and the glorious Godless utopia will naturally result.

    Of course, the father of lies is ultimately behind it all. "He was a liar and a murderer from the beginning."

    When man turns his back on God, nothing good happens. That's the most fundamental problem in Western society today. Not to say that there aren't other issues, but until we return to God, there's not much hope for improvement.

    NoahK , says: December 21, 2017 at 10:15 am
    It's like somebody just got a bunch of right-wing talking points and mashed them together into one incohesive whole. This is just lazy.
    Andrew Imlay , says: December 21, 2017 at 10:36 am
    Hmm. I just wandered over here by accident. Being a construction contractor, I don't know enough about globalization, academia, or finance to evaluate your assertions about those realms. But being in a biracial family, and having lived, worked, and worshiped equally in white and black communities, I can evaluate your statements about social justice, race, and civil rights. Long story short, you pick out fringe liberal ideas, misrepresent them as mainstream among liberals, and shoot them down. Casuistry, anyone?

    You also misrepresent reality to your readers. No, the black underclass is not larger, more dysfunctional, and more alienated now than in the 1960's, when cities across the country burned and machine guns were stationed on the Capitol steps. The "racial divide" is not "starker now than ever"; that's just preposterous to anyone who was alive then. And nobody I've ever known felt "shame" over the "outcome of the civil rights campaign". I know nobody who seeks to "punish and humiliate" the 'privileged'.

    I get that this column is a quick toss-off before the holiday, and that your strength is supposed to be in your presentation, not your ideas. For me, it's a helpful way to rehearse debunking common tropes that I'll encounter elsewhere.

    But, really, your readers deserve better, and so do the people you misrepresent. We need bad liberal ideas to be critiqued while they're still on the fringe. But by calling fringe ideas mainstream, you discredit yourself, misinform your readers, and contribute to stereotypes both of liberals and of conservatives. I'm looking for serious conservative critiques that help me take a second look at familiar ideas. I won't be back.

    peter in boston , says: December 21, 2017 at 10:48 am
    Love Kunstler -- and love reading him here -- but he needs a strong editor to get him to turn a formless harangue into clear essay.
    Someone in the crowd , says: December 21, 2017 at 11:07 am
    I disagree, NoahK, that the whole is incohesive, and I also disagree that these are right-wing talking points.

    The theme of this piece is the long crisis in the US, its nature and causes. At no point does this essay, despite it stream of consciousness style, veer away from that theme. Hence it is cohesive.

    As for the right wing charge, though it is true, to be sure, that Kunstler's position is in many respects classically conservative -- he believes for example that there should be a national consensus on certain fundamentals, such as whether or not there are two sexes (for the most part), or, instead, an infinite variety of sexes chosen day by day at whim -- you must have noticed that he condemned both the voluntarism of Karl Rove AND the voluntarism of the post-structuralist crowd.

    My impression is that what Kunstler is doing here is diagnosing the long crisis of a decadent liberal post-modernity, and his stance is not that of either of the warring sides within our divorced-from-reality political establishment, neither that of the 'right' or 'left.' Which is why, logically, he published it here. National Review would never have accepted this piece. QED.

    Jon , says: December 21, 2017 at 11:10 am
    This malaise is rooted in human consciousness that when reflecting on itself celebrating its capacity for apperception suffers from the tension that such an inquiry, such an inward glance produces. In a word, the capacity for the human being to be aware of his or herself as an intelligent being capable of reflecting on aspects of reality through the artful manipulation of symbols engenders this tension, this angst.

    Some will attempt to extinguish this inner tension through intoxication while others through the thrill of war, and it has been played out since the dawn of man and well documented when the written word emerged.

    The malaise which Mr. Kunstler addresses as the problem of our times is rooted in our existence from time immemorial. But the problem is not only existential but ontological. It is rooted in our being as self-aware creatures. Thus no solution avails itself as humanity in and of itself is the problem. Each side (both right and left) seeks its own anodyne whether through profligacy or intolerance, and each side mans the barricades to clash experiencing the adrenaline rush that arises from the perpetual call to arms.

    Joe the Plutocrat , says: December 21, 2017 at 11:27 am
    "Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class -- which included a great many white Americans who used to be able to support a family with simple labor."

    And to whom do we hand the tab for this? Globalization is a word. It is a concept, a talking point. Globalization is oligarchy by another name. Unfortunately, under-educated, deplorable, Americans; regardless of party affiliation/ideology have embraced. And the most ironic part?

    Russia and China (the eventual surviving oligarchies) will eventually have to duke it out to decide which superpower gets to make the USA it's b*tch (excuse prison reference, but that's where we're headed folks).

    And one more irony. Only in American, could Christianity, which was grew from concepts like compassion, generosity, humility, and benevolence; be re-branded and 'weaponized' to further greed, bigotry, misogyny, intolerance, and violence/war. Americans fiddled (over same sex marriage, abortion, who has to bake wedding cakes, and who gets to use which public restroom), while the oligarchs burned the last resources (natural, financial, and even legal).

    The scientist 880 , says: December 21, 2017 at 11:48 am
    "Today, there is more grievance and resentment, and less hope for a better future, than when Martin Luther King made the case for progress on the steps of the Lincoln Memorial in 1963."

    Spoken like a white guy who has zero contact with black people. I mean, even a little bit of research and familiarity would give lie to the idea that blacks are more pessimistic about life today than in the 1960's.

    Black millenials are the most optimistic group of Americans about the future. Anyone who has spent any significant time around older black people will notice that you don't hear the rose colored memories of the past. Black people don't miss the 1980's, much less the 1950's. Young black people are told by their elders how lucky they are to grow up today because things are much better than when grandpa was our age and we all know this history.\

    It's clear that this part of the article was written from absolute ignorance of the actual black experience with no interest in even looking up some facts. Hell, Obama even gave a speech at Howard telling graduates how lucky they were to be young and black Today compared to even when he was their age in the 80's!

    Here is the direct quote;

    "In my inaugural address, I remarked that just 60 years earlier, my father might not have been served in a D.C. restaurant -- at least not certain of them. There were no black CEOs of Fortune 500 companies. Very few black judges. Shoot, as Larry Wilmore pointed out last week, a lot of folks didn't even think blacks had the tools to be a quarterback. Today, former Bull Michael Jordan isn't just the greatest basketball player of all time -- he owns the team. (Laughter.) When I was graduating, the main black hero on TV was Mr. T. (Laughter.) Rap and hip hop were counterculture, underground. Now, Shonda Rhimes owns Thursday night, and Beyoncé runs the world. (Laughter.) We're no longer only entertainers, we're producers, studio executives. No longer small business owners -- we're CEOs, we're mayors, representatives, Presidents of the United States. (Applause.)

    I am not saying gaps do not persist. Obviously, they do. Racism persists. Inequality persists. Don't worry -- I'm going to get to that. But I wanted to start, Class of 2016, by opening your eyes to the moment that you are in. If you had to choose one moment in history in which you could be born, and you didn't know ahead of time who you were going to be -- what nationality, what gender, what race, whether you'd be rich or poor, gay or straight, what faith you'd be born into -- you wouldn't choose 100 years ago. You wouldn't choose the fifties, or the sixties, or the seventies. You'd choose right now. If you had to choose a time to be, in the words of Lorraine Hansberry, "young, gifted, and black" in America, you would choose right now. (Applause.)"

    https://www.politico.com/story/2016/05/obamas-howard-commencement-transcript-222931

    https://www.google.com/amp/s/m.huffpost.com/us/entry/us_58cf1d9ae4b0ec9d29dcf283/amp

    Adam , says: December 21, 2017 at 11:57 am
    I love reading about how the Community Reinvestment Act was the catalyst of all that is wrong in the world. As someone in the industry the issue was actually twofold. The Commodities Futures Modernization Act turned the mortgage securities market into a casino with the underlying actual debt instruments multiplied through the use of additional debt instruments tied to the performance but with no actual underlying value. These securities were then sold around the world essentially infecting the entire market. In order that feed the beast, these NON GOVERNMENT loans had their underwriting standards lowered to rediculous levels. If you run out of qualified customers, just lower the qualifications. Government loans such as FHA, VA, and USDA were avoided because it was easier to qualify people with the new stuff. And get paid. The short version is all of the incentives that were in place at the time, starting with the Futures Act, directly led to the actions that culminated in the Crash. So yes, it was the government, just a different piece of legislation.
    SteveM , says: December 21, 2017 at 12:29 pm
    Kunstler itemizing the social and economic pathologies in the United States is not enough. Because there are other models that demonstrate it didn't have to be this way.

    E.g. Germany. Germany is anything but perfect and its recent government has screwed up with its immigration policies. But Germany has a high standard of living, an educated work force (including unions and skilled crafts-people), a more rational distribution of wealth and high quality universal health care that costs 47% less per capita than in the U.S. and with no intrinsic need to maraud around the planet wasting gobs of taxpayer money playing Global Cop.

    The larger subtext is that the U.S. house of cards was planned out and constructed as deliberately as the German model was. Only the objective was not to maximize the health and happiness of the citizenry, but to line the pockets of the parasitic Elites. (E.g., note that Mitch McConnell has been a government employee for 50 years but somehow acquired a net worth of over $10 Million.)

    P.S. About the notionally high U.S. GDP. Factor out the TRILLIONS inexplicably hoovered up by the pathological health care system, the metastasized and sanctified National Security State (with its Global Cop shenanigans) and the cronied-up Ponzi scheme of electron-churn financialization ginned up by Goldman Sachs and the rest of the Banksters, and then see how much GDP that reflects the actual wealth of the middle class is left over.

    One Guy , says: December 21, 2017 at 1:10 pm
    Right-Wing Dittoheads and Fox Watchers love to blame the Community Reinvestment Act. It allows them to blame both poor black people AND the government. The truth is that many parties were to blame.
    LouB , says: December 21, 2017 at 1:14 pm
    One of the things I love about this rag is that almost all of the comments are included. You may be sure that similar commenting privilege doesn't exist most anywhere else.

    Any disfavor regarding the supposed bleakness with the weak hearted souls aside, Mr K's broadside seems pretty spot on to me.

    tzx4 , says: December 21, 2017 at 1:57 pm
    I think the author overlooks the fact that government over the past 30 to 40 years has been tilting the playing field ever more towards the uppermost classes and against the middle class. The evisceration of the middle class is plain to see.

    If the the common man had more money and security, lots of our current intrasocial conflicts would be far less intense.

    Jeeves , says: December 21, 2017 at 2:09 pm
    Andrew Imlay: You provide a thoughtful corrective to one of Kunstler's more hyperbolic claims. And you should know that his jeremiad doesn't represent usual fare at TAC. So do come back.

    Whether or not every one of Kunstler's assertions can withstand a rigorous fact-check, he is a formidable rhetorician. A generous serving of Weltschmerz is just what the season calls for.

    Wezz , says: December 21, 2017 at 2:44 pm
    America is stupefied from propaganda on steroids for, largely from the right wing, 25? years of Limbaugh, Fox, etc etc etc Clinton hate x 10, "weapons of mass destruction", "they hate us because we are free", birtherism, death panels, Jade Helm, pedophile pizza, and more Clinton hate porn.

    Americans have been taught to worship the wealthy regardless of how they got there. Americans have been taught they are "Exceptional" (better, smarter, more godly than every one else) in spite of outward appearances. Americans are under educated and encouraged to make decisions based on emotion from constant barrage of extra loud advertising from birth selling illusion.

    Americans brain chemistry is most likely as messed up as the rest of their bodies from junk or molested food. Are they even capable of normal thought?

    Donald Trump has convinced at least a third of Americans that only he, Fox, Breitbart and one or two other sources are telling the Truth, every one else is lying and that he is their friend.

    Is it possible we are just plane doomed and there's no way out?

    John Blade Wiederspan , says: December 21, 2017 at 4:26 pm
    I loathe the cotton candy clown and his Quislings; however, I must admit, his presence as President of the United States has forced everyone (left, right, religious, non-religious) to look behind the curtain. He has done more to dis-spell the idealism of both liberal and conservative, Democrat and Republican, rich and poor, than any other elected official in history. The sheer amount of mind-numbing absurdity resulting from a publicity stunt that got out of control ..I am 70 and I have seen a lot. This is beyond anything I could ever imagine. America is not going to improve or even remain the same. It is in a 4 year march into worse, three years to go.
    EarlyBird , says: December 21, 2017 at 5:23 pm
    Sheesh. Should I shoot myself now, or wait until I get home?
    dvxprime , says: December 21, 2017 at 5:46 pm
    Mr. Kuntzler has an honest and fairly accurate assessment of the situation. And as usual, the liberal audience that TAC is trying so hard to reach, is tossing out their usual talking points whilst being in denial of the situation.

    The Holy Bible teaches us that repentance is the first crucial step on the path towards salvation. Until the progressives, from their alleged "elite" down the rank and file at Kos, HuffPo, whatever, take a good, long, hard look at the current national dumpster fire and start claiming some responsibility, America has no chance of solving problems or fixing anything.

    Slooch , says: December 21, 2017 at 7:03 pm
    Kunstler must have had a good time writing this, and I had a good time reading it. Skewed perspective, wild overstatement, and obsessive cherry-picking of the rare checkable facts are mixed with a little eye of newt and toe of frog and smothered in a oar and roll of rhetoric that was thrilling to be immersed in. Good work!
    jp , says: December 21, 2017 at 8:09 pm
    aah, same old Kunstler, slightly retailored for the Trump years.

    for those of you familiar with him, remember his "peak oil" mania from the late 00s and early 2010s? every blog post was about it. every new year was going to be IT: the long emergency would start, people would be Mad Maxing over oil supplies cos prices at the pump would be $10 a gallon or somesuch.

    in this new rant, i did a control-F for "peak oil" and hey, not a mention. I guess even cranks like Kunstler know when to give a tired horse a rest.

    c.meyer , says: December 21, 2017 at 8:30 pm
    So what else is new. Too 'clever', overwritten, no new ideas. Can't anyone move beyond clichés?
    Active investor , says: December 22, 2017 at 12:35 am
    Kunstler once again waxes eloquent on the American body politic. Every word rings true, except when it doesn't. At times poetic, at other times paranoid, Kunstler does us a great service by pointing a finger at the deepest pain points in America, any one of which could be the geyser that brings on catastrophic failure.

    However, as has been pointed out, he definitely does not hang out with black people. For example, the statement:

    But the residue of the "Black Power" movement is still present in the widespread ambivalence about making covenant with a common culture, and it has only been exacerbated by a now long-running "multiculturalism and diversity" crusade that effectively nullifies the concept of a national common culture.

    The notion of a 'national common culture' is interesting but pretty much a fantasy that never existed, save colonial times.

    Yet Kunstler's voice is one that must be heard, even if he is mostly tuning in to the widespread radicalism on both ends of the spectrum, albeit in relatively small numbers. Let's face it, people are in the streets marching, yelling, and hating and mass murders keep happening, with the regularity of Old Faithful. And he makes a good point about academia loosing touch with reality much of the time. He's spot on about the false expectations of what technology can do for the economy, which is inflated with fiat currency and God knows how many charlatans and hucksters. And yes, the white working class is feeling increasingly like a 'victim group.'

    While Kunstler may be more a poet than a lawyer, more songwriter than historian, my gut feeling is that America had better take notice of him, as The American ship of state is being swept by a ferocious tide and the helmsman is high on Fentanyl (made in China).

    JonF , says: December 22, 2017 at 9:52 am
    Re: The crisis actually had its roots in the Clinton Administration's use of the Community Reinvestment Act

    Here we go again with this rotting zombie which rises from its grave no matter how many times it has been debunked by statisticians and reputable economists (and no, not just those on the left– the ranks include Bruce Bartlett for example, a solid Reaganist). To reiterate again : the CRA played no role in the mortgage boom and bust. Among other facts in the way of that hypothesis is the fact that riskiest loans were being made by non-bank lenders (Countrywide) who were not covered by the CRA which only applied to actual banks– and the banks did not really get into the game full tilt, lowering their lending standards, until late in the game, c. 2005, in response to their loss of business to the non-bank lenders. Ditto for the GSEs, which did not lower their standards until 2005 and even then relied on wall Street to vet the subprime loans they were buying.

    To be sure, blaming Wall Street for everything is also wrong-headed, though wall Street certainly did some stupid, greedy and shady things (No, I am not letting them off the hook!) But the cast of miscreants is numbered in the millions and it stretches around the planet. Everyone (for example) who got into the get-rich-quick Ponzi scheme of house flipping, especially if they lied about their income to do so. And everyone who took out a HELOC (Home Equity Line of Credit) and foolishly charged it up on a consumption binge. And shall we talk about the mortgage brokers who coached people into lying, the loan officers who steered customers into the riskiest (and highest earning) loans they could, the sellers who asked palace-prices for crackerbox hovels, the appraisers who rubber-stamped such prices, the regulators who turned a blind eye to all the fraud and malfeasance, the ratings agencies who handed out AAA ratings to securities full of junk, the politicians who rejoiced over the apparent "Bush Boom" well, I could continue, but you get the picture.

    We have met the enemy and he was us.

    kevin on the left , says: December 22, 2017 at 10:49 am
    "The Holy Bible teaches us that repentance is the first crucial step on the path towards salvation. Until the progressives, from their alleged "elite" down the rank and file at Kos, HuffPo, whatever, take a good, long, hard look at the current national dumpster fire and start claiming some responsibility, America has no chance of solving problems or fixing anything."

    Pretty sure that calling other people to repent of their sin of disagreeing with you is not quite what the Holy Bible intended.

    [Dec 19, 2017] Do not Underestimate the Power of Microfoundations

    Highly recommended!
    Nice illustration of ideologically based ostrakism as practiced in Academia: "Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."
    Notable quotes:
    "... A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned. ..."
    "... The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for ..."
    "... Mathematical masturbations are just a smoke screen used to conceal a simple fact that those "economists" are simply banking oligarchy stooges. Hired for the specific purpose to provide a theoretical foundation for revanschism of financial oligarchy after New Deal run into problems. Revanschism that occurred in a form of installing neoliberal ideology in the USA in exactly the same role which Marxism was installed in the USSR. With "iron hand in velvet gloves" type of repressive apparatus to enforce it on each and every university student and thus to ensure the continues, recurrent brainwashing much like with Marxism on the USSR universities. ..."
    "... To ensure continuation of power of "nomenklatura" in the first case and banking oligarchy in the second. Connections with reality be damned. Money does not smell. ..."
    "... Economic departments fifth column of neoliberal stooges is paid very good money for their service of promoting and sustaining this edifice of neoliberal propaganda. Just look at Greg Mankiw and Rubin's boys. ..."
    "... "Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders." ..."
    Apr 04, 2015 | Economist's View

    Darryl FKA Ron -> pgl...

    At the risk of oversimplifying might it not be as simple as stronger leanings towards IS-LM and kind are indicative of a bias towards full employment and stronger leanings towards DSGE, microfoundations, and kind are indicative of a bias towards low inflation?

    IN general I consider over-simplification a fault, if and only if, it is a rigidly adhered to final position. This is to say that over-simplification is always a good starting point and never a good ending point. If in the end your problem was simple to begin with, then the simplified answer would not be OVER-simplified anyway. It is just as bad to over-complicate a simple problem as it is to over-simplify a complex problem. It is easier to build complexity on top of a simple foundation than it is to extract simplicity from a complex foundation.

    A lot of the Chicago School initiative into microfoundations and DSGE may have been motivated by a desire to bind Keynes in a NAIRU straight-jacket. Even though economic policy making is largely done just one step at a time then that is still one step too much if it might violate rentier interests.

    Darryl FKA Ron -> Barry...

    There are two possible (but unlikely) schools of (generously attributed to as) thought for which internal consistency might take precedence over external consistency. One such school wants to consider what would be best in a perfect world full of perfect people and then just assume that is best for the real world just to let the chips fall where they may according to the faults and imperfections of the real world. The second such school is the one whose eyes just glaze over mesmerized by how over their heads they are and remain affraid to ask any question lest they appear stupid.

    A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned.

    Richard H. Serlin

    Consistency sounds so good, Oh, of course we want consistency, who wouldn't?! But consistent in what way? What exactly do you mean? Consistent with reality, or consistent with people all being superhumans? Which concept is usually more useful, or more useful for the task at hand?

    Essentially, they want models that are consistent with only certain things, and often because this makes their preferred ideology look far better. They want models, typically, that are consistent with everyone in the world having perfect expertise in every subject there is, from finance to medicine to engineering, perfect public information, and perfect self-discipline, and usually on top, frictionless and perfectly complete markets, often perfectly competitive too.

    But a big thing to note is that perfectly consistent people means a level of perfection in expertise, public information, self-discipline, and "rationality", that's extremely at odds with how people actually are. And as a result, this can make the model extremely misleading if it's interpreted very literally (as so often it is, especially by freshwater economists), or taken as The Truth, as Paul Krugman puts it.

    You get things like the equity premium "puzzle", which involves why people don't invest more in stocks when the risk-adjusted return appears to usually be so abnormally good, and this "puzzle" can only be answered with "consistency", that people are all perfectly expert in finance, with perfect information, so they must have some mysterious hidden good reason. It can't be at all that it's because 65% of people answered incorrectly when asked how many reindeer would remain if Santa had to lay off 25% of his eight reindeer ( http://richardhserlin.blogspot.com/2013/12/surveys-showing-massive-ignorance-and.html ).

    Yes, these perfect optimizer consistency models can give useful insights, and help to see what is best, what we can do better, and they can, in some cases, be good as approximations. But to say they should be used only, and interpreted literally, is, well, inconsistent with optimal, rational behavior -- of the economist using them.

    Richard H. Serlin -> Richard H. Serlin...
    Of course, unless the economist using them is doing so to mislead people into supporting his libertarian/plutocratic ideology.

    dilbert dogbert

    As an old broken down mech engineer, I wonder why all the pissing and moaning about micro foundations vs aggregation. In strength of materials equations that aggregate properties work quite well within the boundaries of the questions to be answered. We all know that at the level of crystals, materials have much complexity. Even within crystals there is deeper complexities down to the molecular levels. However, the addition of quantum mechanics adds no usable information about what materials to build a bridge with.

    But, when working at the scale of the most advanced computer chips quantum mechanics is required. WTF! I guess in economics there is no quantum mechanics theories or even reliable aggregation theories.

    Poor economists, doomed to argue, forever, over how many micro foundations can dance on the head of a pin.

    RGC -> dilbert dogbert...

    Endless discussions about how quantum effects aggregate to produce a material suitable for bridge building crowd out discussions about where and when to build bridges. And if plutocrats fund the endless discussions, we get the prominent economists we have today.

    Darryl FKA Ron -> dilbert dogbert...

    "...I guess in economics there is no quantum mechanics theories or even reliable aggregation theories..."

    [I guess it depends upon what your acceptable confidence interval on reliability is. Most important difference that controls all the domain differences between physical science and economics is that underlying physical sciences there is a deterministic methodology for which probable error is merely a function of the inaccuracy in input metrics WHEREAS economics models are incomplete probabilistic estimating models with no ability to provide a complete system model in a full range of circumstances.

    YOu can design and build a bridge to your load and span requirements with alternative models for various designs with confidence and highly effective accuracy repeatedly. No ecomomic theory, model, or combination of models and theories was ever intended to be used as the blueprint for building an economy from the foundation up.

    With all the formal trappings of economics the only effective usage is to decide what should be done in a given set of predetermined circumstance to reach some modest desired effect. Even that modest goal is exposed to all kinds of risks inherent in assumptions, incomplete information, externalities, and so on that can produce errors of uncertain potential bounds.

    Nonetheless, well done economics can greatly reduce the risks encountered in the random walk of economics policy making. So much so is this true, that the bigger questions in macro-economics policy making is what one is willing to risk and for whom.

    The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for.]

    Darryl FKA Ron -> Peter K....

    unless you have a model which maps the real world fairly closely like quantum mechanics.

    [You set a bar too high. Macro models at best will tell you what to do to move the economy in the direction that you seek to go. They do not even ocme close to the notion of a theory of everything that you have in physics, even the theory of every little thing that is provided by quantum mechanics. Physics is an empty metaphor for economics. Step one is to forgo physics envy in pursuit of understanding suitable applications and domain constraints for economics models.

    THe point is to reach a decision and to understand cause and effect directions. All precision is in the past and present. The future is both imprecise and all that there is that is available to change.

    For the most part an ounce of common sense and some simple narrative models are all that are essential for making those policy decisions in and of themselves. HOWEVER, nation states are not ruled by economist philosopher kings and in the process of concensus decision making by (little r)republican governments then human language is a very imprecise vehicle for communicating logic and reason with respect to the management of complex systems. OTOH, mathematics has given us a universal language for communicating logic and reason that is understood the same by everyone that really understands that language at all. Hence mathematical models were born for the economists to write down their own thinking in clear precise terms and check their own work first and then share it with others so equipped to understand the language of mathematics. Krugman has said as much many times and so has any and every economist worth their salt.]

    likbez -> Syaloch...

    I agree with Pgl and PeterK. Certain commenters like Darryl seem convinced that the Chicago School (if not all of econ) is driven by sinister, class-based motives to come up justifications for favoring the power elite over the masses. But based on what I've read, it seems pretty obvious that the microfoundation guys just got caught up in their fancy math and their desire to produce more elegant, internally consistent models and lost sight of the fact that their models didn't track reality.

    That's completely wrong line of thinking, IMHO.

    Mathematical masturbations are just a smoke screen used to conceal a simple fact that those "economists" are simply banking oligarchy stooges. Hired for the specific purpose to provide a theoretical foundation for revanschism of financial oligarchy after New Deal run into problems. Revanschism that occurred in a form of installing neoliberal ideology in the USA in exactly the same role which Marxism was installed in the USSR.
    With "iron hand in velvet gloves" type of repressive apparatus to enforce it on each and every university student and thus to ensure the continues, recurrent brainwashing much like with Marxism on the USSR universities.

    To ensure continuation of power of "nomenklatura" in the first case and banking oligarchy in the second. Connections with reality be damned. Money does not smell.

    Economic departments fifth column of neoliberal stooges is paid very good money for their service of promoting and sustaining this edifice of neoliberal propaganda. Just look at Greg Mankiw and Rubin's boys.

    But the key problem with neoliberalism is that the cure is worse then disease. And here mathematical masturbations are very handy as a smoke screen to hide this simple fact.

    likbez -> likbez...

    Here is how Rubin's neoliberal boy Larry explained the situation to Elizabeth Warren:

    "Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."

    Elizabeth Warren, A Fighting Chance

    Syaloch -> likbez...

    Yeah, case in point.

    [Dec 19, 2017] Mark Ames Kathy Lally Was Caught Trying To Censor Journalism In Russia and Now Deceitfully Claims She's a Victim

    Dec 19, 2017 | www.nakedcapitalism.com

    We accompanied that with a prank in which we posed as Potanin calling the Washington Wizards for courtside seats, Harvard University business school to purchase a degree, and the Augusta National Golf Club -- brandishing Hiatt's article for access:

    eXile : I am Russian banker, so-called robber baron capitalist, am interested in purchasing your degree.

    Harvard : ( pause ) Uh, sir, you can't buy the degree, but you can enroll in our program. It's an intensive 9 week program, and you receive a certificate, not a degree.

    eXile : No, this is no good. Do you realize who I am? Fred Hiatt wrote about me in today Washington Post, that I am not typical robber baron. I am ze baby billionaire.

    Harvard : We read a lot about Russia and it sounds very exciting.

    eXile : Of course it exciting. Now I vant Harvard degree.

    Harvard : You can't buy a degree.

    eXile : Maybe instead I build nice cafe for you on campus. Or I can donate small nightclub for Harvard degree.

    Harvard : Sir, Harvard is a 350-year-old institution. It's not all just about money. We've turned down princes.

    eXile : NOT ABOUT MONEY? Hah!

    [Dec 15, 2017] The Crisis Ahead The U.S. Is No Country for Older Men and Women

    Notable quotes:
    "... The U.S. has a retirement crisis on its hands, and with the far right controlling the executive branch and both houses of Congress, as well as dozens of state governments, things promise to grow immeasurably worse. ..."
    "... It wasn't supposed to be this way. Past progressive presidents, notably Franklin D. Roosevelt and Lyndon B. Johnson, took important steps to make life more comfortable for aging Americans. FDR signed the Social Security Act of 1935 into law as part of his New Deal, and when LBJ passed Medicare in 1965, he established a universal health care program for those 65 and older. But the country has embraced a neoliberal economic model since the election of Ronald Reagan, and all too often, older Americans have been quick to vote for far-right Republicans antagonistic to the social safety net. ..."
    "... Since then, Ryan has doubled down on his delusion that the banking sector can manage Social Security and Medicare more effectively than the federal government. Republican attacks on Medicare have become a growing concern: according to EBRI, only 38 percent of workers are confident the program will continue to provide the level of benefits it currently does. ..."
    "... As 2017 winds down, Americans with health problems are still in the GOP's crosshairs -- this time because of so-called tax reform. The Tax Cuts and Jobs Act (both the House and Senate versions) includes provisions that would undermine Obamacare and cause higher health insurance premiums for older Americans. According to AARP, "Older adults ages 50-64 would be at particularly high risk under the proposal, facing average premium increases of up to $1,500 in 2019 as a result of the bill." ..."
    "... Countless Americans who are unable to afford those steep premiums would lose their insurance. The CBO estimates that the Tax Cuts and Jobs Act would cause the number of uninsured under 65 to increase 4 million by 2019 and 13 million by 2027. The bill would also imperil Americans 65 and over by cutting $25 billion from Medicare . ..."
    "... Analyzing W2 tax records in 2012, U.S. Census Bureau researchers Michael Gideon and Joshua Mitchell found that only 14 percent of private-sector employers in the U.S. were offering a 401(k) or similar retirement packages to their workers. That figure was thought to be closer to 40 percent, but Gideon and Mitchell discovered the actual number was considerably lower when smaller businesses were carefully analyzed, and that larger companies were more likely to offer 401(k) plans than smaller ones. ..."
    "... Today, millions of Americans work in the gig economy who don't have full-time jobs or receive W2s, but instead receive 1099s for freelance work. ..."
    "... The combination of stagnant wages and an increasingly high cost of living have been especially hellish for Americans who are trying to save for retirement. The United States' national minimum wage, a mere $7.25 per hour, doesn't begin to cover the cost of housing at a time when rents have soared nationwide. Never mind the astronomical prices in New York City, San Francisco or Washington, D.C. Median rents for one-bedroom apartments are as high as $1,010 per month in Atlanta, $960 per month in Baltimore, $860 per month in Jacksonville and $750 per month in Omaha, according to ApartmentList.com. ..."
    "... yeah, Canada has a neoliberal infestation that is somewhere between the US and the UK. France has got one too, but it is less advanced. I'll enjoy my great healthcare, public transportation, and generous paid time off while I can. ..."
    "... Europeans may scratch their heads, but they should recall their own histories and the long struggle to the universal benefits now enjoyed. Americans are far too complacent. This mildness is viewed by predators as weakness and the attacks will continue. ..."
    "... Not sure if many of the readers here watch non-cable national broadcast news, but Pete Peterson and his foundation are as everpresent an advertiser as the pharma industry. Peterson is the strongest, best organized advocate for gutting social services, social security, and sending every last penny out of the tax-mule consumer's pocket toward wall street. The guy needs an equivalent counterpoint enemy. ..."
    "... The social advantages that we still enjoy were fought in the streets, and on the "bricks" flowing with the participants blood. 8 hr. day; women's right to vote; ability and right for groups of laborers to organize; worker safety laws ..and so many others. There is no historical memory on how those rights were achieved. We are slowly slipping into an oligarchy greased by the idea that the physical possession of material things is all that matters. Sheeple, yes. ..."
    "... Mmm, I think American voters get what they want in the end. They want their politicians because they believe the lies. 19% of Americans believe they are in the top 1% of wealth. A huge percentage of poor people believe they or their kids will (not can, but will) become wealthy. Most Americans can't find France on a map. ..."
    "... I may have been gone for about thirty years, but that has only sharpened my insights into America. It's very hard to see just how flawed America is from the inside but when you step outside and have some perspective, it's frightening. ..."
    "... Our government, beginning with Reagan, turned its back on promoting the general welfare. The wealthy soon learned that their best return on investment was the "purchase" of politicians willing to pass the legislation they put in their hands. Much of their investment included creating the right wing media apparatus. ..."
    "... The Class War is real. It has been going on for 40 years, with the Conservative army facing virtually no resistance. Conservatives welcome Russia's help. Conservatives welcome barriers to people voting. Conservatives welcome a populace that believes lies that benefit them. Conservatives welcome the social and financial decline of the entire middle class and poor as long as it profits the rich financially, and by extension enhances their power politically. ..."
    "... "Single acts of tyranny may be ascribed to the accidental opinion of the day, but a series of oppressions, begun at a distinguished period and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematic plan of reducing [a people] to slavery" Thomas Jefferson. Rights of British America, 1774 ME 1:193, Papers 1:125 ..."
    "... yes, my problem with the post as well, completely ignores democrat complicity the part where someone with a 26k salary will pay 16k in insurance? No they won't, the system would collapse in that case which will be fine with me. ..."
    "... As your quote appears to imply, it's not a problem that can be solved by voting which, let's not forget, is nothing more than expressing an opinion. I am not sticking around just to find out if economically-crushed, opiod-, entertainment-, social media-addled Americans are actually capable of rolling out tumbrils for trips to the guillotines in the city squares. I strongly suspect not. ..."
    "... This is the country where, after the banks crushed the economy in 2008, caused tens of thousands to lose their jobs, and then got huge bailouts, the people couldn't even be bothered to take their money out of the big banks and put it elsewhere. Because, you know, convenience! Expressing an opinion, or mobilizing others to express an opinion, or educating or proselytizing others about what opinion to have, is about the limit of what they are willing, or know how to do. ..."
    Dec 14, 2017 | www.nakedcapitalism.com

    Yves here. I imagine many readers are acutely aware of the problems outlined in this article, if not beset by them already. By any rational standard, I should move now to a much cheaper country that will have me. I know individuals who live most of the year in third-world and near-third world countries, but they have very cheap ways of still having a toehold in the US and not (yet or maybe ever) getting a long-term residence visa. Ecuador is very accommodating regarding retirement visas, and a Social Security level income goes far there, but yours truly isn't retiring any time soon. And another barrier to an international move (which recall I did once, so I have some appreciation for what it takes), is that one ought to check out possible destinations but if you are already time and money and energy stressed, how do you muster the resources to do that at all, let alone properly?

    Aside from the potential to greatly reduce fixed costs, a second impetus for me is Medicare. I know for most people, getting on Medicare is a big plus. I have a very rare good, very old insurance policy. When you include the cost of drug plans, Medicare is no cheaper than what I have now, and considerably narrows my network. Moreover, I expect it to be thoroughly crapified by ten years from now (when I am 70), which argues for getting out of Dodge sooner rather than later.

    And that's before you get to another wee problem Lambert points out that I would probably not be happy in a third world or high end second world country. But the only bargain "world city" I know of is Montreal. I'm not sure it would represent enough of an all-in cost saving to justify the hassle of an international move and the attendant tax compliance burdens .and that charitably assumes I could even find a way to get permanent residence. Ugh.

    By Alex Henderson, who has written for the L.A. Weekly, Billboard, Spin, Creem, the Pasadena Weekly and many other publications. Follow him on Twitter @alexvhenderson. Originally published at Alternet

    Millions can no longer afford to retire, and may never be able when the GOP passes its tax bill.

    The news is not good for millions of aging Baby Boomers and Gen Xers in the United States who are moving closer to retirement age. According to the Employee Benefit Research Institute's annual report on retirement preparedness for 2017, only 18 percent of U.S.-based workers feel "very confident" about their ability to retire comfortably ; Craig Copeland, senior research associate for EBRI and the report's co-author, cited "debt, lack of a retirement plan at work, and low savings" as "key factors" in workers' retirement-related anxiety. The Insured Retirement Institute finds a mere 23 percent of Baby Boomers and 24 percent of Gen Xers are confident that their savings will last in retirement. To make matters worse, more than 40 percent of Boomers and over 30 percent of Gen Xers report having no retirement savings whatsoever .

    The U.S. has a retirement crisis on its hands, and with the far right controlling the executive branch and both houses of Congress, as well as dozens of state governments, things promise to grow immeasurably worse.

    It wasn't supposed to be this way. Past progressive presidents, notably Franklin D. Roosevelt and Lyndon B. Johnson, took important steps to make life more comfortable for aging Americans. FDR signed the Social Security Act of 1935 into law as part of his New Deal, and when LBJ passed Medicare in 1965, he established a universal health care program for those 65 and older. But the country has embraced a neoliberal economic model since the election of Ronald Reagan, and all too often, older Americans have been quick to vote for far-right Republicans antagonistic to the social safety net.

    In the 2016 presidential election, 55 percent of voters 50 and older cast their ballots for Donald Trump against just 44 percent for Hillary Clinton. (This was especially true of older white voters; 90 percent of black voters 45 and older, as well as 67 percent of Latino voters in the same age range voted Democratic.)

    Sen. Bernie Sanders' (I-VT) economic proposals may have been wildly popular with millennials, but no demographic has a greater incentive to vote progressive than Americans facing retirement. According to research conducted by the American Association of Retired Persons, the three greatest concerns of Americans 50 and older are Social Security, health care costs and caregiving for loved ones -- all areas that have been targeted by Republicans.

    House of Representatives Speaker Paul Ryan, a devotee of social Darwinist Ayn Rand , has made no secret of his desire to privatize Social Security and replace traditional Medicare with a voucher program. Had George W. Bush had his way and turned Social Security over to Wall Street, the economic crash of September 2008 might have left millions of senior citizens homeless.

    Since then, Ryan has doubled down on his delusion that the banking sector can manage Social Security and Medicare more effectively than the federal government. Republican attacks on Medicare have become a growing concern: according to EBRI, only 38 percent of workers are confident the program will continue to provide the level of benefits it currently does.

    The GOP's obsession with abolishing the Affordable Care Act is the most glaring example of its disdain for aging Americans. Yet Obamacare has been a blessing for Boomers and Gen Xers who have preexisting conditions. The ACA's guaranteed issue plans make no distinction between a 52-year-old American with diabetes, heart disease or asthma and a 52-year-old who has never had any of those illnesses. And AARP notes that under the ACA, the uninsured rate for Americans 50 and older decreased from 15 percent in 2013 to 9 percent in 2016.

    According to the Congressional Budget Office, the replacement bills Donald Trump hoped to ram through Congress this year would have resulted in staggering premium hikes for Americans over 50. The CBO's analysis of the American Health Care Act, one of the earlier versions of Trumpcare, showed that a 64-year-old American making $26,500 per year could have gone from paying $1,700 annually in premiums to just over $16,000. The CBO also estimated that the GOP's American Health Care Act would have deprived 23 million Americans of health insurance by 2026.

    As 2017 winds down, Americans with health problems are still in the GOP's crosshairs -- this time because of so-called tax reform. The Tax Cuts and Jobs Act (both the House and Senate versions) includes provisions that would undermine Obamacare and cause higher health insurance premiums for older Americans. According to AARP, "Older adults ages 50-64 would be at particularly high risk under the proposal, facing average premium increases of up to $1,500 in 2019 as a result of the bill."

    The CBO estimates that the bill will cause premiums to spike an average of 10 percent overall, with average premiums increasing $890 per year for a 50-year-old, $1,100 per year for a 55-year-old, $1,350 per year for a 60-year-old and $1,490 per year for a 64-year-old. Premium increases, according to the CBO, would vary from state to state; in Maine, average premiums for a 64-year-old would rise as much as $1,750 per year.

    Countless Americans who are unable to afford those steep premiums would lose their insurance. The CBO estimates that the Tax Cuts and Jobs Act would cause the number of uninsured under 65 to increase 4 million by 2019 and 13 million by 2027. The bill would also imperil Americans 65 and over by cutting $25 billion from Medicare .

    As morally reprehensible as the GOP's tax legislation may be, it is merely an acceleration of the redistribution of wealth from the bottom to the top that America has undergone since the mid-1970s. (President Richard Nixon may have been a paranoid right-winger with authoritarian tendencies, but he expanded Medicare and supported universal health care.) Between the decline of labor unions, age discrimination, stagnant wages, an ever-rising cost of living, low interest rates, and a shortage of retirement accounts, millions of Gen Xers and Baby Boomers may never be able to retire.

    Traditional defined-benefit pensions were once a mainstay of American labor, especially among unionized workers. But according to Pew Charitable Trusts, only 13 percent of Baby Boomers still have them (among millennials, the number falls to 6 percent). In recent decades, 401(k) plans have become much more prominent, yet a majority of American workers don't have them either.

    Analyzing W2 tax records in 2012, U.S. Census Bureau researchers Michael Gideon and Joshua Mitchell found that only 14 percent of private-sector employers in the U.S. were offering a 401(k) or similar retirement packages to their workers. That figure was thought to be closer to 40 percent, but Gideon and Mitchell discovered the actual number was considerably lower when smaller businesses were carefully analyzed, and that larger companies were more likely to offer 401(k) plans than smaller ones.

    Today, millions of Americans work in the gig economy who don't have full-time jobs or receive W2s, but instead receive 1099s for freelance work. Tax-deferred SEP-IRAs were once a great, low-risk way for freelancers to save for retirement without relying exclusively on Social Security, but times have changed since the 1980s and '90s when interest rates were considerably higher for certificates of deposit and savings accounts. According to Bankrate.com, average rates for one-year CDs dropped from 11.27 percent in 1984 to 8.1 percent in 1990 to 5.22 percent in 1995 to under 1 percent in 2010, where it currently remains.

    The combination of stagnant wages and an increasingly high cost of living have been especially hellish for Americans who are trying to save for retirement. The United States' national minimum wage, a mere $7.25 per hour, doesn't begin to cover the cost of housing at a time when rents have soared nationwide. Never mind the astronomical prices in New York City, San Francisco or Washington, D.C. Median rents for one-bedroom apartments are as high as $1,010 per month in Atlanta, $960 per month in Baltimore, $860 per month in Jacksonville and $750 per month in Omaha, according to ApartmentList.com.

    That so many older Americans are renting at all is ominous in its own right. FDR made home ownership a primary goal of the New Deal, considering it a key component of a thriving middle class. But last year, the Urban Institute found that 19 million Americans who previously owned a home are now renting, 31 percent between the ages of 36 and 45. Laurie Goodman, one of the study's authors, contends the Great Recession has "permanently raised the number of renters," and that the explosion of foreclosures has hit Gen Xers especially hard.

    The severity of the U.S. retirement crisis is further addressed in journalist Jessica Bruder's new book "Nomadland: Surviving America in the 21st Century," which follows Americans in their 50s, 60s and even 70s living in RVs or vans , barely eking out a living doing physically demanding, seasonal temp work from harvesting sugar beets to cleaning toilets at campgrounds. Several had high-paying jobs before their lives were blown apart by the layoffs, foreclosures and corporate downsizing of the Great Recession. Bruder speaks with former college professors and software professionals who now find themselves destitute, teetering on the brink of homelessness and forced to do backbreaking work for next to nothing. Unlike the big banks, they never received a bailout.

    These neo-nomads recall the transients of the 1930s, themselves victims of Wall Street's recklessness. But whereas FDR won in a landslide in 1932 and aggressively pursued a program of progressive economic reforms, Republicans in Congress have set out to shred what little remains of the social safety net, giving huge tax breaks to millionaires and billionaires . The older voters who swept Trump into office may have signed their own death warrants.

    If aging Americans are going to be saved from this dystopian future, the U.S. will have to forge a new Great Society. Programs like Social Security, Medicare and Medicaid will need to be strengthened, universal health care must become a reality and age discrimination in the workplace will have to be punished as a civil rights violation like racial and gender-based discrimination. If not, millions of Gen Xers and Boomers will spend their golden years scraping for pennies.

    Expat , , December 14, 2017 at 6:29 am

    I certainly will never go back to the States for these and other reasons. I have a friend, also an American citizen, who travels frequently back to California to visit his son. He is truly worried about getting sick or having an accident when he is there since he knows it might bankrupt him. As he jokes, he would be happy to have another heart attack here in France since it's free!

    For those of you who have traveled the world and talked to people, you probably know that most foreigners are perplexed by America's attitude to health care and social services. The richest nation in the world thinks that health and social security (in the larger sense of not being forced into the street) are not rights at all. Europeans scratch their heads at this.

    The only solution is education and information, but they are appalling in America. America remains the most ignorant and worst educated of the developed nations and is probably beaten by many developing nations. It is this ignorance and stupidity that gets Americans to vote for the likes of Trump or any of the other rapacious millionaires they send to office every year.

    A first step would be for Americans to insist that Congress eliminate its incredibly generous and life-long healthcare plans for elected officials. They should have to do what the rest of Americans do. Of course, since about 95% of Congress are millionaires, it might not be effective. But it's a start.

    vidimi , , December 14, 2017 at 6:40 am

    France has its share of problems, but boy do they pale next to the problems in America or even Canada. Life here is overall quite pleasant and I have no desire to go back to N.A.

    Marco , , December 14, 2017 at 6:46 am

    Canada has problems?

    WobblyTelomeres , , December 14, 2017 at 7:47 am

    Was in Yellowknife a couple of years ago. The First Nations people have a rough life. From what I've read, such extends across the country.

    vidimi , , December 14, 2017 at 8:03 am

    yeah, Canada has a neoliberal infestation that is somewhere between the US and the UK. France has got one too, but it is less advanced. I'll enjoy my great healthcare, public transportation, and generous paid time off while I can.

    JEHR , , December 14, 2017 at 1:46 pm

    The newest neoliberal effort in Canada was put forward by our Minister of Finance (a millionaire) who is touting a bill that will get rid of defined benefit pension plans given to public employees for so-called target benefit pension plans. The risk for target plans is taken by the recipient. Morneau's former firm promotes target benefit pension plans and the change could benefit Morneau himself as he did not put his assets from his firm in a blind trust. At the very least, he has a conflict of interest and should probably resign.

    There is always an insidious group of wealthy people here who would like to re-make the world in their own image. I fear for the future.

    JEHR , , December 14, 2017 at 1:55 pm

    Yes, I agree. There is an effort to "simplify" the financial system of the EU to take into account the business cycle and the financial cycle .

    Dita , , December 14, 2017 at 8:25 am

    Europeans may scratch their heads, but they should recall their own histories and the long struggle to the universal benefits now enjoyed. Americans are far too complacent. This mildness is viewed by predators as weakness and the attacks will continue.

    jefemt , , December 14, 2017 at 10:02 am

    We really should be able to turn this around, and have an obligation to ourselves and our 'nation state' , IF there were a group of folks running on a fairness, one-for-all, all-for-one platform. That sure isn't the present two-sides-of-the-same-coin Democraps and Republicrunts.

    Not sure if many of the readers here watch non-cable national broadcast news, but Pete Peterson and his foundation are as everpresent an advertiser as the pharma industry. Peterson is the strongest, best organized advocate for gutting social services, social security, and sending every last penny out of the tax-mule consumer's pocket toward wall street. The guy needs an equivalent counterpoint enemy.

    Check it out, and be vigilant in dispelling his message and mission. Thanks for running this article.

    Running away: the almost-haves run to another nation state, the uber-wealthy want to leave the earth, or live in their private Idaho in the Rockies or on the Ocean. What's left for the least among us? Whatever we create?
    https://www.pgpf.org/

    Scramjett , , December 14, 2017 at 1:43 pm

    I think pathologically optimistic is a better term than complacent. Every time someone dumps on them, their response is usually along the lines of "Don't worry, it'll get better," "Everything works itself out in the end," "maybe we'll win the lottery," my personal favorite "things will get better, just give it time" (honestly it's been 40 years of this neoliberal bullcrap, how much more time are we supposed to give it?), "this is just a phase" or "we can always bring it back later and better than ever." The last one is most troubling because after 20 years of witnessing things in the public sphere disappearing, I've yet to see a single thing return in any form at all.

    I'm not sure where this annoying optimism came from but I sure wish it would go away.

    sierra7 , , December 14, 2017 at 8:45 pm

    The "optimism" comes from having a lack of historical memory. So many social protections that we have/had is seen as somehow coming out of the ether benevolently given without any social struggles. The lack of historical education on this subject in particular is appalling. Now, most would probably look for an "APP" on their "dumbphones" to solve the problem.

    The social advantages that we still enjoy were fought in the streets, and on the "bricks" flowing with the participants blood. 8 hr. day; women's right to vote; ability and right for groups of laborers to organize; worker safety laws ..and so many others. There is no historical memory on how those rights were achieved. We are slowly slipping into an oligarchy greased by the idea that the physical possession of material things is all that matters. Sheeple, yes.

    Jeremy Grimm , , December 14, 2017 at 4:44 pm

    WOW! You must have been outside the U.S. for a long time. Your comment seems to suggest we still have some kind of democracy here. We don't get to pick which rapacious millionaires we get to vote for and it doesn't matter any way since whichever one we pick from the sad offerings ends up with policies dictated from elsewhere.

    Expat , , December 14, 2017 at 6:10 pm

    Mmm, I think American voters get what they want in the end. They want their politicians because they believe the lies. 19% of Americans believe they are in the top 1% of wealth. A huge percentage of poor people believe they or their kids will (not can, but will) become wealthy. Most Americans can't find France on a map.

    So, yes, you DO get to pick your rapacious millionaire. You send the same scumbags back to Washington every year because it's not him, it the other guys who are the problem. One third of Americans support Trump! Really, really support him. They think he is Jesus, MacArthur and Adam Smith all rolled up into one.

    I may have been gone for about thirty years, but that has only sharpened my insights into America. It's very hard to see just how flawed America is from the inside but when you step outside and have some perspective, it's frightening.

    Disturbed Voter , , December 14, 2017 at 6:29 am

    The Democrat party isn't a reform party. Thinking it is so, is because of the "No Other Choice" meme. Not saying that the Republican party works in my favor. They don't. Political reform goes deeper than reforming either main party. It means going to a European plurality system (with its own downside). That way growing Third parties will be viable, if they have popular, as opposed to millionaire, support. I don't see this happening, because of Citizens United, but if all you have is hope, then you have to go with that.

    Carolinian , , December 14, 2017 at 8:05 am

    Had George W. Bush had his way and turned Social Security over to Wall Street, the economic crash of September 2008 might have left millions of senior citizens homeless.

    Substitute Bill Clinton for George Bush in that sentence and it works just as well. Neoliberalism is a bipartisan project.

    And many of the potential and actual horrors described above arise from the price distortions of the US medical system with Democratic acquiescence in said system making things worse. The above article reads like a DNC press release.

    And finally while Washington politicians of both parties have been threatening Social Security for years that doesn't mean its third rail status has been repealed. The populist tremors of the last election -- which have caused our elites to lose their collective mind -- could be a mere prelude to what will happen in the event of a full scale assault on the safety net.

    KYrocky , , December 14, 2017 at 12:05 pm

    Substitute Obama's quest for a Grand Bargain as well.

    Our government, beginning with Reagan, turned its back on promoting the general welfare. The wealthy soon learned that their best return on investment was the "purchase" of politicians willing to pass the legislation they put in their hands. Much of their investment included creating the right wing media apparatus.

    The Class War is real. It has been going on for 40 years, with the Conservative army facing virtually no resistance. Conservatives welcome Russia's help. Conservatives welcome barriers to people voting. Conservatives welcome a populace that believes lies that benefit them. Conservatives welcome the social and financial decline of the entire middle class and poor as long as it profits the rich financially, and by extension enhances their power politically.

    If retirees flee our country that will certainly please the Conservatives as that will be fewer critics (enemies). Also less need or demand for social programs.

    rps , , December 14, 2017 at 5:01 pm

    "Single acts of tyranny may be ascribed to the accidental opinion of the day, but a series of oppressions, begun at a distinguished period and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematic plan of reducing [a people] to slavery" Thomas Jefferson. Rights of British America, 1774 ME 1:193, Papers 1:125

    tegnost , , December 14, 2017 at 8:59 am

    yes, my problem with the post as well, completely ignores democrat complicity the part where someone with a 26k salary will pay 16k in insurance? No they won't, the system would collapse in that case which will be fine with me.

    Marco , , December 14, 2017 at 6:55 am

    "President Richard Nixon may have been a paranoid right-winger with authoritarian tendencies, but he expanded Medicare and supported universal health care."

    "Gimme that old time Republican!"

    One of the reasons I love NC is that most political economic analysis is often more harsh on the Democrats than the Repubs so I am a bit dismayed how this article is way too easy on Team D. How many little (and not so little) knives in the back from Clinton and Obama? Is a knife in the chest that much worse?

    OpenThePodBayDoorsHAL , December 14, 2017 at 3:57 pm

    This entire thread is simply heartbreaking, Americans have had their money, their freedom, their privacy, their health, and sometimes their very lives taken away from them by the State. But the heartbreaking part is that they feel they are powerless to do anything at all about it so are just trying to leave.

    But "People should not fear the government; the government should fear the people"

    tagio , December 14, 2017 at 4:39 pm

    It's more than a feeling, HAL. https://www.newyorker.com/news/john-cassidy/is-america-an-oligarchy Link to the academic paper embedded in article.

    As your quote appears to imply, it's not a problem that can be solved by voting which, let's not forget, is nothing more than expressing an opinion. I am not sticking around just to find out if economically-crushed, opiod-, entertainment-, social media-addled Americans are actually capable of rolling out tumbrils for trips to the guillotines in the city squares. I strongly suspect not.

    This is the country where, after the banks crushed the economy in 2008, caused tens of thousands to lose their jobs, and then got huge bailouts, the people couldn't even be bothered to take their money out of the big banks and put it elsewhere. Because, you know, convenience! Expressing an opinion, or mobilizing others to express an opinion, or educating or proselytizing others about what opinion to have, is about the limit of what they are willing, or know how to do.

    [Dec 13, 2017] A stunning 33% of job seekers ages 55 and older are long-term unemployed, according to the AARP Public Policy Institute

    Notable quotes:
    "... And, recent studies have shown, the longer you're out of work - especially if you're older and out of work - the harder it becomes to get a job offer. ..."
    Dec 13, 2017 | www.nakedcapitalism.com

    Livius Drusus , December 13, 2017 at 2:44 pm

    I thought this was an interesting article. Apologies if this has been posted on NC already.

    A stunning 33% of job seekers ages 55 and older are long-term unemployed, according to the AARP Public Policy Institute. The average length of unemployment for the roughly 1.2 million people 55+ who are out of work: seven to nine months. "It's emotionally devastating for them," said Carl Van Horn, director of Rutgers University's John J. Heldrich Center for Workforce Development, at a Town Hall his center and the nonprofit WorkingNation held earlier this year in New Brunswick, N.J.

    ... ... ...

    The fight faced by the long-term unemployed

    And, recent studies have shown, the longer you're out of work - especially if you're older and out of work - the harder it becomes to get a job offer.

    The job-finding rate declines by roughly 50% within eight months of unemployment, according to a 2016 paper by economists Gregor Jarosch of Stanford University and Laura Pilossoph of the Federal Reserve Bank of New York. "Unemployment duration has a strongly negative effect on the likelihood of subsequent employment," wrote researchers from the University of Maryland and the U.S. Census Bureau in another 2016 paper.

    "Once upon a time, you could take that first job and it would lead to the next job and the job after that," said Town Hall panelist John Colborn, chief operating officer at the nonprofit JEVS Human Services, of Philadelphia. "The notion of a career ladder offered some hope of getting back into the labor market. The rungs of the ladder are getting harder and harder to find and some of them are broken."

    In inner cities, said Kimberly McClain, CEO of The Newark Alliance, "there's an extra layer beyond being older and out of work. There are issues of race and poverty and being defined by your ZIP Code. There's an incredible sense of urgency."

    ... ... ...

    Filling a work gap

    If you are over 50, unemployed and have a work gap right now, the Town Hall speakers said, fill it by volunteering, getting an internship, doing project work, job-shadowing someone in a field you want to be in or taking a class to re-skill. These kind of things "make a candidate a lot more attractive," said Colborn. Be sure to note them in your cover letter and résumé.

    Town Hall panelist Amanda Mullan, senior vice president and chief human resources officer of the New Jersey Resources Corp. (a utility company based in Wall, N.J.), said that when her company is interviewing someone who has been out of work lately, "we will ask: 'What have you done during that time frame?' If we get 'Nuthin,' that shows something about the individual, from a motivational perspective."

    ... ... ...

    The relief of working again

    Finally finding work when you're over 50 and unemployed for a stretch can be a relief for far more than financial reasons.

    "Once I landed my job, the thing I most looked forward to was the weekend," said Konopka. "Not to relax, but because I didn't have to think about finding a job anymore. That's 24/7 in your head. You're always thinking on a Saturday: 'If I'm not doing something to find a job, will there be a posting out there?'"

    Full article: https://www.marketwatch.com/story/jobs-are-everywhere-just-not-for-people-over-55-2017-12-08

    [Dec 13, 2017] Stress of long-term unemployment takes a toll on thousands of Jerseyans who are out of work by Leslie Kwoh

    Notable quotes:
    "... Leslie Kwoh may be reached at lkwoh@starledger.com or (973) 392-4147. ..."
    Jun 13, 2010 | www.nj.com

    At 5:30 every morning, Tony Gwiazdowski rolls out of bed, brews a pot of coffee and carefully arranges his laptop, cell phone and notepad like silverware across the kitchen table.

    And then he waits.

    Gwiazdowski, 57, has been waiting for 16 months. Since losing his job as a transportation sales manager in February 2009, he wakes each morning to the sobering reminder that, yes, he is still unemployed. So he pushes aside the fatigue, throws on some clothes and sends out another flurry of resumes and cheery cover letters.

    But most days go by without a single phone call. And around sundown, when he hears his neighbors returning home from work, Gwiazdowski -- the former mayor of Hillsborough -- can't help but allow himself one tiny sigh of resignation.

    "You sit there and you wonder, 'What am I doing wrong?'" said Gwiazdowski, who finds companionship in his 2-year-old golden retriever, Charlie, until his wife returns from work.

    "The worst moment is at the end of the day when it's 4:30 and you did everything you could, and the phone hasn't rung, the e-mails haven't come through."

    Gwiazdowski is one of a growing number of chronically unemployed workers in New Jersey and across the country who are struggling to get through what is becoming one long, jobless nightmare -- even as the rest of the economy has begun to show signs of recovery.

    Nationwide, 46 percent of the unemployed -- 6.7 million Americans -- have been without work for at least half a year, by far the highest percentage recorded since the U.S. Labor Department began tracking the data in 1948.

    In New Jersey, nearly 40 percent of the 416,000 unemployed workers last year fit that profile, up from about 20 percent in previous years, according to the department, which provides only annual breakdowns for individual states. Most of them were unemployed for more than a year.

    But the repercussions of chronic unemployment go beyond the loss of a paycheck or the realization that one might never find the same kind of job again. For many, the sinking feeling of joblessness -- with no end in sight -- can take a psychological toll, experts say.

    Across the state, mental health crisis units saw a 20 percent increase in demand last year as more residents reported suffering from unemployment-related stress, according to the New Jersey Association of Mental Health Agencies.

    "The longer the unemployment continues, the more impact it will have on their personal lives and mental health," said Shauna Moses, the association's associate executive director. "There's stress in the marriage, with the kids, other family members, with friends."

    And while a few continue to cling to optimism, even the toughest admit there are moments of despair: Fear of never finding work, envy of employed friends and embarassment at having to tell acquaintances that, nope, still no luck.

    "When they say, 'Hi Mayor,' I don't tell a lot of people I'm out of work -- I say I'm semi-retired," said Gwiazdowski, who maxed out on unemployment benefits several months ago.

    "They might think, 'Gee, what's wrong with him? Why can't he get a job?' It's a long story and maybe people really don't care and now they want to get away from you."


    SECOND TIME AROUND

    Lynn Kafalas has been there before, too. After losing her computer training job in 2000, the East Hanover resident took four agonizing years to find new work -- by then, she had refashioned herself into a web designer.

    That not-too-distant experience is why Kafalas, 52, who was laid off again eight months ago, grows uneasier with each passing day. Already, some of her old demons have returned, like loneliness, self-doubt and, worst of all, insomnia. At night, her mind races to dissect the latest interview: What went wrong? What else should she be doing? And why won't even Barnes & Noble hire her?

    "It's like putting a stopper on my life -- I can't move on," said Kafalas, who has given up karate lessons, vacations and regular outings with friends. "Everything is about the interviews."

    And while most of her friends have been supportive, a few have hinted to her that she is doing something wrong, or not doing enough. The remarks always hit Kafalas with a pang.

    In a recent study, researchers at Rutgers University found that the chronically unemployed are prone to high levels of stress, anxiety, depression, loneliness and even substance abuse, which take a toll on their self-esteem and personal relationships.

    "They're the forgotten group," said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers, and a co-author of the report. "And the longer you are unemployed, the less likely you are to get a job."

    Of the 900 unemployed workers first interviewed last August for the study, only one in 10 landed full-time work by March of this year, and only half of those lucky few expressed satisfaction with their new jobs. Another one in 10 simply gave up searching.

    Among those who were still unemployed, many struggled to make ends meet by borrowing from friends or family, turning to government food stamps and forgoing health care, according to the study.

    More than half said they avoided all social contact, while slightly less than half said they had lost touch with close friends. Six in 10 said they had problems sleeping.

    Kafalas says she deals with her chronic insomnia by hitting the gym for two hours almost every evening, lifting weights and pounding the treadmill until she feels tired enough to fall asleep.

    "Sometimes I forget what day it is. Is it Tuesday? And then I'll think of what TV show ran the night before," she said. "Waiting is the toughest part."


    AGE A FACTOR

    Generally, the likelihood of long-term unemployment increases with age, experts say. A report by the National Employment Law Project this month found that nearly half of those who were unemployed for six months or longer were at least 45 years old. Those between 16 and 24 made up just 14 percent.

    Tell that to Adam Blank, 24, who has been living with his girlfriend and her parents at their Martinsville home since losing his sales job at Best Buy a year and half ago.

    Blank, who graduated from Rutgers with a major in communications, says he feels like a burden sometimes, especially since his girlfriend, Tracy Rosen, 24, works full-time at a local nonprofit. He shows her family gratitude with small chores, like taking out the garbage, washing dishes, sweeping floors and doing laundry.

    Still, he often feels inadequate.

    "All I'm doing on an almost daily basis is sitting around the house trying to keep myself from going stir-crazy," said Blank, who dreams of starting a social media company.

    When he is feeling particularly low, Blank said he turns to a tactic employed by prisoners of war in Vietnam: "They used to build dream houses in their head to help keep their sanity. It's really just imagining a place I can call my own."


    LESSONS LEARNED

    Meanwhile, Gwiazdowski, ever the optimist, says unemployment has taught him a few things.

    He has learned, for example, how to quickly assess an interviewer's age and play up or down his work experience accordingly -- he doesn't want to appear "threatening" to a potential employer who is younger. He has learned that by occasionally deleting and reuploading his resume to job sites, his entry appears fresh.

    "It's almost like a game," he said, laughing. "You are desperate, but you can't show it."

    But there are days when he just can't find any humor in his predicament -- like when he finishes a great interview but receives no offer, or when he hears a fellow job seeker finally found work and feels a slight twinge of jealousy.

    "That's what I'm missing -- putting on that shirt and tie in the morning and going to work," he said.

    The memory of getting dressed for work is still so vivid, Gwiazdowski says, that he has to believe another job is just around the corner.

    "You always have to hope that that morning when you get up, it's going to be the day," he said.

    "Today is going to be the day that something is going to happen."

    Leslie Kwoh may be reached at lkwoh@starledger.com or (973) 392-4147.

    DrBuzzard Jun 13, 2010

    I collect from the state of iowa, was on tier I and when the gov't recessed without passing extension, iowa stopped paying tier I claims that were already open, i was scheduled to be on tier I until july 15th, and its gone now, as a surprise, when i tried to claim my week this week i was notified. SURPRISE, talk about stress.

    berganliz Jun 13, 2010

    This is terrible....just wait until RIF'd teachers hit the unemployment offices....but then, this is what NJ wanted...fired teachers who are to blame for the worst recession our country has seen in 150 years...thanks GWB.....thanks Donald Rumsfeld......thanks Dick Cheney....thanks Karl "Miss Piggy" Rove...and thank you Mr. Big Boy himself...Gov Krispy Kreame!

    rp121 Jun 13, 2010

    For readers who care about this nation's unemployed- Call your Senators to pass HR 4213, the "Extenders" bill. Unfortunately, it does not add UI benefits weeks, however it DOES continue the emergency federal tiers of UI. If it does not pass this week many of us are cut off at 26 wks. No tier 1, 2 -nothing.

    [Dec 13, 2017] Unemployment health hazard and stress

    The longer you are unemployed, the more you are effected by those factors.
    Notable quotes:
    "... The good news is that only a relatively small number of people are seriously affected by the stress of unemployment to the extent they need medical assistance. Most people don't get to the serious levels of stress, and much as they loathe being unemployed, they suffer few, and minor, ill effects. ..."
    "... Worries about income, domestic problems, whatever, the list is as long as humanity. The result of stress is a strain on the nervous system, and these create the physical effects of the situation over time. The chemistry of stress is complex, but it can be rough on the hormonal system. ..."
    "... Not at all surprisingly, people under stress experience strong emotions. It's a perfectly natural response to what can be quite intolerable emotional strains. It's fair to say that even normal situations are felt much more severely by people already under stress. Things that wouldn't normally even be issues become problems, and problems become serious problems. Relationships can suffer badly in these circumstances, and that, inevitably, produces further crises. Unfortunately for those affected, these are by now, at this stage, real crises. ..."
    "... Some people are stubborn enough and tough enough mentally to control their emotions ruthlessly, and they do better under these conditions. Even that comes at a cost, and although under control, the stress remains a problem. ..."
    "... One of the reasons anger management is now a growth industry is because of the growing need for assistance with severe stress over the last decade. This is a common situation, and help is available. ..."
    "... Depression is universally hated by anyone who's ever had it. ..."
    "... Very important: Do not, under any circumstances, try to use drugs or alcohol as a quick fix. They make it worse, over time, because they actually add stress. Some drugs can make things a lot worse, instantly, too, particularly the modern made-in-a-bathtub variety. They'll also destroy your liver, which doesn't help much, either. ..."
    "... You don't have to live in a gym to get enough exercise for basic fitness. A few laps of the pool, a good walk, some basic aerobic exercises, you're talking about 30-45 minutes a day. It's not hard. ..."
    Dec 13, 2017 | www.cvtips.com

    It's almost impossible to describe the various psychological impacts, because there are so many. There are sometimes serious consequences, including suicide, and, some would say worse, chronic depression.

    There's not really a single cause and effect. It's a compound effect, and unemployment, by adding stress, affects people, often badly.

    The world doesn't need any more untrained psychologists, and we're not pretending to give medical advice. That's for professionals. Everybody is different, and their problems are different. What we can do is give you an outline of the common problems, and what you can do about them.

    The good news is that only a relatively small number of people are seriously affected by the stress of unemployment to the extent they need medical assistance. Most people don't get to the serious levels of stress, and much as they loathe being unemployed, they suffer few, and minor, ill effects.

    For others, there are a series of issues, and the big three are:

    Stress

    Stress is Stage One. It's a natural result of the situation. Worries about income, domestic problems, whatever, the list is as long as humanity. The result of stress is a strain on the nervous system, and these create the physical effects of the situation over time. The chemistry of stress is complex, but it can be rough on the hormonal system.

    Over an extended period, the body's natural hormonal balances are affected, and this can lead to problems. These are actually physical issues, but the effects are mental, and the first obvious effects are, naturally, emotional.

    Anger, and other negative emotions

    Not at all surprisingly, people under stress experience strong emotions. It's a perfectly natural response to what can be quite intolerable emotional strains. It's fair to say that even normal situations are felt much more severely by people already under stress. Things that wouldn't normally even be issues become problems, and problems become serious problems. Relationships can suffer badly in these circumstances, and that, inevitably, produces further crises. Unfortunately for those affected, these are by now, at this stage, real crises.

    If the actual situation was already bad, this mental state makes it a lot worse. Constant aggravation doesn't help people to keep a sense of perspective. Clear thinking isn't easy when under constant stress.

    Some people are stubborn enough and tough enough mentally to control their emotions ruthlessly, and they do better under these conditions. Even that comes at a cost, and although under control, the stress remains a problem.

    One of the reasons anger management is now a growth industry is because of the growing need for assistance with severe stress over the last decade. This is a common situation, and help is available.

    If you have reservations about seeking help, bear in mind it can't possibly be any worse than the problem.

    Depression

    Depression is universally hated by anyone who's ever had it. This is the next stage, and it's caused by hormonal imbalances which affect serotonin. It's actually a physical problem, but it has mental effects which are sometimes devastating, and potentially life threatening.

    The common symptoms are:

    It's a disgusting experience. No level of obscenity could possibly describe it. Depression is misery on a level people wouldn't conceive in a nightmare. At this stage the patient needs help, and getting it is actually relatively easy. It's convincing the person they need to do something about it that's difficult. Again, the mental state is working against the person. Even admitting there's a problem is hard for many people in this condition.

    Generally speaking, a person who is trusted is the best person to tell anyone experiencing the onset of depression to seek help. Important: If you're experiencing any of those symptoms:

    Very important: Do not, under any circumstances, try to use drugs or alcohol as a quick fix. They make it worse, over time, because they actually add stress. Some drugs can make things a lot worse, instantly, too, particularly the modern made-in-a-bathtub variety. They'll also destroy your liver, which doesn't help much, either.

    Alcohol, in particular, makes depression much worse. Alcohol is a depressant, itself, and it's also a nasty chemical mix with all those stress hormones.

    If you've ever had alcohol problems, or seen someone with alcohol wrecking their lives, depression makes things about a million times worse.

    Just don't do it. Steer clear of any so-called stimulants, because they don't mix with antidepressants, either.

    Unemployment and staying healthy

    The above is what you need to know about the risks of unemployment to your health and mental well being.

    These situations are avoidable.

    Your best defense against the mental stresses and strains of unemployment, and their related problems is staying healthy.

    We can promise you that is nothing less than the truth. The healthier you are, the better your defenses against stress, and the more strength you have to cope with situations.

    Basic health is actually pretty easy to achieve:

    Diet

    Eat real food, not junk, and make sure you're getting enough food. Your body can't work with resources it doesn't have. Good food is a real asset, and you'll find you don't get tired as easily. You need the energy reserves.

    Give yourself a good selection of food that you like, that's also worth eating.

    The good news is that plain food is also reasonably cheap, and you can eat as much as you need. Basic meals are easy enough to prepare, and as long as you're getting all the protein veg and minerals you need, you're pretty much covered.

    You can also use a multivitamin cap, or broad spectrum supplements, to make sure you're getting all your trace elements. Also make sure you're getting the benefits of your food by taking acidophilus or eating yogurt regularly.

    Exercise

    You don't have to live in a gym to get enough exercise for basic fitness. A few laps of the pool, a good walk, some basic aerobic exercises, you're talking about 30-45 minutes a day. It's not hard.

    Don't just sit and suffer

    If anything's wrong, check it out when it starts, not six months later. Most medical conditions become serious when they're allowed to get worse.

    For unemployed people the added risk is also that they may prevent you getting that job, or going for interviews. If something's causing you problems, get rid of it.

    Nobody who's been through the blender of unemployment thinks it's fun.

    Anyone who's really done it tough will tell you one thing:

    Don't be a victim. Beat the problem, and you'll really appreciate the feeling.

    [Dec 13, 2017] Being homeless is better than working for Amazon by Nichole Gracely

    Notable quotes:
    "... According to Amazon's metrics, I was one of their most productive order pickers -- I was a machine, and my pace would accelerate throughout the course of a shift. What they didn't know was that I stayed fast because if I slowed down for even a minute, I'd collapse from boredom and exhaustion ..."
    "... toiling in some remote corner of the warehouse, alone for 10 hours, with my every move being monitored by management on a computer screen. ..."
    "... ISS could simply deactivate a worker's badge and they would suddenly be out of work. They treated us like beggars because we needed their jobs. Even worse, more than two years later, all I see is: Jeff Bezos is hiring. ..."
    "... I have never felt more alone than when I was working there. I worked in isolation and lived under constant surveillance ..."
    "... That was 2012 and Amazon's labor and business practices were only beginning to fall under scrutiny. ..."
    "... I received $200 a week for the following six months and I haven't had any source of regular income since those benefits lapsed. I sold everything in my apartment and left Pennsylvania as fast as I could. I didn't know how to ask for help. I didn't even know that I qualified for food stamps. ..."
    Nov 28, 2014 | theguardian.com

    wa8dzp:

    Nichole Gracely has a master's degree and was one of Amazon's best order pickers. Now, after protesting the company, she's homeless.

    I am homeless. My worst days now are better than my best days working at Amazon.

    According to Amazon's metrics, I was one of their most productive order pickers -- I was a machine, and my pace would accelerate throughout the course of a shift. What they didn't know was that I stayed fast because if I slowed down for even a minute, I'd collapse from boredom and exhaustion.

    During peak season, I trained incoming temps regularly. When that was over, I'd be an ordinary order picker once again, toiling in some remote corner of the warehouse, alone for 10 hours, with my every move being monitored by management on a computer screen.

    Superb performance did not guarantee job security. ISS is the temp agency that provides warehouse labor for Amazon and they are at the center of the SCOTUS case Integrity Staffing Solutions vs. Busk. ISS could simply deactivate a worker's badge and they would suddenly be out of work. They treated us like beggars because we needed their jobs. Even worse, more than two years later, all I see is: Jeff Bezos is hiring.

    I have never felt more alone than when I was working there. I worked in isolation and lived under constant surveillance. Amazon could mandate overtime and I would have to comply with any schedule change they deemed necessary, and if there was not any work, they would send us home early without pay. I started to fall behind on my bills.

    At some point, I lost all fear. I had already been through hell. I protested Amazon. The gag order was lifted and I was free to speak. I spent my last days in a lovely apartment constructing arguments on discussion boards, writing articles and talking to reporters. That was 2012 and Amazon's labor and business practices were only beginning to fall under scrutiny. I walked away from Amazon's warehouse and didn't have any other source of income lined up.

    I cashed in on my excellent credit, took out cards, and used them to pay rent and buy food because it would be six months before I could receive my first unemployment compensation check.

    I received $200 a week for the following six months and I haven't had any source of regular income since those benefits lapsed. I sold everything in my apartment and left Pennsylvania as fast as I could. I didn't know how to ask for help. I didn't even know that I qualified for food stamps.

    I furthered my Amazon protest while homeless in Seattle. When the Hachette dispute flared up I "flew a sign," street parlance for panhandling with a piece of cardboard: "I was an order picker at amazon.com. Earned degrees. Been published. Now, I'm homeless, writing and doing this. Anything helps."

    I have made more money per word with my signs than I will probably ever earn writing, and I make more money per hour than I will probably ever be paid for my work. People give me money and offer well wishes and I walk away with a restored faith in humanity.

    I flew my protest sign outside Whole Foods while Amazon corporate employees were on lunch break, and they gawked. I went to my usual flying spots around Seattle and made more money per hour protesting Amazon with my sign than I did while I worked with them. And that was in Seattle. One woman asked, "What are you writing?" I told her about the descent from working poor to homeless, income inequality, my personal experience. She mentioned Thomas Piketty's book, we chatted a little, she handed me $10 and wished me luck. Another guy said, "Damn, that's a great story! I'd read it," and handed me a few bucks.

    [snip]

    [Dec 12, 2017] Can Uber Ever Deliver Part Eleven Annual Uber Losses Now Approaching $5 Billion

    Notable quotes:
    "... Total 2015 gross passenger payments were 200% higher than 2014, but Uber corporate revenue improved 300% because Uber cut the driver share of passenger revenue from 83% to 77%. This was an effective $500 million wealth transfer from drivers to Uber's investors. ..."
    "... Uber's P&L gains were wiped out by higher non-EBIDTAR expense. Thus the 300% Uber revenue growth did not result in any improvement in Uber profit margins. ..."
    "... In 2016, Uber unilaterally imposed much larger cuts in driver compensation, costing drivers an additional $3 billion. [6] Prior to Uber's market entry, the take home pay of big-city cab drivers in the US was in the $12-17/hour range, and these earnings were possible only if drivers worked 65-75 hours a week. ..."
    "... An independent study of the net earnings of Uber drivers (after accounting for the costs of the vehicles they had to provide) in Denver, Houston and Detroit in late 2015 (prior to Uber's big 2016 cuts) found that driver earnings had fallen to the $10-13/hour range. [7] Multiple recent news reports have documented how Uber drivers are increasing unable to support themselves from their reduced share of passenger payments. [8] ..."
    "... Since mass driver defections would cause passenger volume growth to collapse completely, Uber was forced to reverse these cuts in 2017 and increased the driver share from 68% to 80%. This meant that Uber's corporate revenue, which had grown over 300% in 2015 and over 200% in 2016 will probably only grow by about 15% in 2017. ..."
    "... Socialize the losses, privatize the gains, VC-ize the subsidies. ..."
    "... The cold hard truth is that Uber is backed into a corner with severely limited abilities to tweak the numbers on either the supply or the demand side: cut driver compensation and they trigger driver churn (as has already been demonstrated), increase fare prices for riders and riders defect to cheaper alternatives. ..."
    "... "Growth and Efficiency" are the sine qua non of Neoliberalism. Kalanick's "hype brilliance" was to con the market with "revenue growth" and signs ..."
    Dec 12, 2017 | www.nakedcapitalism.com

    Uber lost $2.5 billion in 2015, probably lost $4 billion in 2016, and is on track to lose $5 billion in 2017.

    The top line on the table below shows is total passenger payments, which must be split between Uber corporate and its drivers. Driver gross earnings are substantially higher than actual take home pay, as gross earning must cover all the expenses drivers bear, including fuel, vehicle ownership, insurance and maintenance.

    Most of the "profit" data released by Uber over time and discussed in the press is not true GAAP (generally accepted accounting principles) profit comparable to the net income numbers public companies publish but is EBIDTAR contribution. Companies have significant leeway as to how they calculate EBIDTAR (although it would exclude interest, taxes, depreciation, amortization) and the percentage of total costs excluded from EBIDTAR can vary significantly from quarter to quarter, given the impact of one-time expenses such as legal settlements and stock compensation. We only have true GAAP net profit results for 2014, 2015 and the 2nd/3rd quarters of 2017, but have EBIDTAR contribution numbers for all other periods. [5]

    Uber had GAAP net income of negative $2.6 billion in 2015, and a negative profit margin of 132%. This is consistent with the negative $2.0 billion loss and (143%) margin for the year ending September 2015 presented in part one of the NC Uber series over a year ago.

    No GAAP profit results for 2016 have been disclosed, but actual losses likely exceed $4 billion given the EBIDTAR contribution of negative $3.2 billion. Uber's GAAP losses for the 2nd and 3rd quarters of 2017 were over $2.5 billion, suggesting annual losses of roughly $5 billion.

    While many Silicon Valley funded startups suffered large initial losses, none of them lost anything remotely close to $2.6 billion in their sixth year of operation and then doubled their losses to $5 billion in year eight. Reversing losses of this magnitude would require the greatest corporate financial turnaround in history.

    No evidence of significant efficiency/scale gains; 2015 and 2016 margin improvements entirely explained by unilateral cuts in driver compensation, but losses soared when Uber had to reverse these cuts in 2017.

    Total 2015 gross passenger payments were 200% higher than 2014, but Uber corporate revenue improved 300% because Uber cut the driver share of passenger revenue from 83% to 77%. This was an effective $500 million wealth transfer from drivers to Uber's investors. These driver compensation cuts improved Uber's EBIDTAR margin, but Uber's P&L gains were wiped out by higher non-EBIDTAR expense. Thus the 300% Uber revenue growth did not result in any improvement in Uber profit margins.

    In 2016, Uber unilaterally imposed much larger cuts in driver compensation, costing drivers an additional $3 billion. [6] Prior to Uber's market entry, the take home pay of big-city cab drivers in the US was in the $12-17/hour range, and these earnings were possible only if drivers worked 65-75 hours a week.

    An independent study of the net earnings of Uber drivers (after accounting for the costs of the vehicles they had to provide) in Denver, Houston and Detroit in late 2015 (prior to Uber's big 2016 cuts) found that driver earnings had fallen to the $10-13/hour range. [7] Multiple recent news reports have documented how Uber drivers are increasing unable to support themselves from their reduced share of passenger payments. [8]

    A business model where profit improvement is hugely dependent on wage cuts is unsustainable, especially when take home wages fall to (or below) minimum wage levels. Uber's primary focus has always been the rate of growth in gross passenger revenue, as this has been a major justification for its $68 billion valuation. This growth rate came under enormous pressure in 2017 given Uber efforts to raise fares, major increases in driver turnover as wages fell, [9] and the avalanche of adverse publicity it was facing.

    Since mass driver defections would cause passenger volume growth to collapse completely, Uber was forced to reverse these cuts in 2017 and increased the driver share from 68% to 80%. This meant that Uber's corporate revenue, which had grown over 300% in 2015 and over 200% in 2016 will probably only grow by about 15% in 2017.

    MKS , December 12, 2017 at 6:19 am

    "Uber's business model can never produce sustainable profits"

    Two words not in my vocabulary are "Never" and "Always", that is a pretty absolute statement in an non-absolute environment. The same environment that has produced the "Silicon Valley Growth Model", with 15x earnings companies like NVIDA, FB and Tesla (Average earnings/stock price ratio in dot com bubble was 10x) will people pay ridiculous amounts of money for a company with no underlying fundamentals you damn right they will! Please stop with the I know all no body knows anything, especially the psychology and irrationality of markets which are made up of irrational people/investors/traders.

    JohnnySacks ,