Tag Archives: Inequality

Blogging Made Very, Very Easy (Political Economy Edition)

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I could just quote Paul Krugman. With appropriate attribution, of course:

But how can the effects of redistribution on growth be benign? Doesn’t generous aid to the poor reduce their incentive to work? Don’t taxes on the rich reduce their incentive to get even richer? Yes and yes — but incentives aren’t the only things that matter. Resources matter too — and in a highly unequal society, many people don’t have them.

Think, in particular, about the ever-popular slogan that we should seek equality of opportunity, not equality of outcomes. That may sound good to people with no idea what life is like for tens of millions of Americans; but for those with any reality sense, it’s a cruel joke. Almost 40 percent of American children live in poverty or near-poverty. Do you really think they have the same access to education and jobs as the children of the affluent?

… This isn’t just bad for those unlucky enough to be born to the wrong parents; it represents a huge and growing waste of human potential — a waste that surely acts as a powerful if invisible drag on economic growth.

Now, I don’t want to claim that addressing income inequality would help everyone. The very affluent would lose more from higher taxes than they gained from better economic growth. But it’s pretty clear that taking on inequality would be good, not just for the poor, but for the middle class….

In short, what’s good for the 1 percent isn’t good for America. And we don’t have to keep living in a new Gilded Age if we don’t want to.

One of the comments at the Times website suggested we should stop talking about equality and talk about fairness instead. When we talk about equality, the right-wing response is “but people aren’t all the same  — what you want to do is punish success”. That’s not true but it’s a clever response. The natural response to talking about fairness is “life isn’t fair”. No, but we could and should make it more fair than it is. Not just for ethical reasons, but, as Krugman points out, for pragmatic reasons as well.

It’s the Austerity and Lack of Trust

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The chart below shows government spending after our last four recessions (that’s total federal, state and local spending, corrected for inflation, with the numbers at the bottom representing yearly quarters after the recessions).

After three recessions, government spending went up. After the most recent recession, it’s gone down:

blog_austerity_state_local_federal_spending_0

It makes sense for families to cut spending if they run into economic difficulty, but it makes no sense for the government to do the same. In situations like we’re in now, the government has to counteract the natural tendency of families and businesses to cut back when economic times are hard. Common sense and economic theory tell us the government should spend more after a recession in order to help the economy recover, even if that means increasing government debt until things get better. Yet we’ve been following the opposite policy the past few years. The result has been a relatively weak recovery that has left too many Americans unemployed and underemployed.

Why have we acted so stupidly? The obvious answer is that there were Republicans in the White House after those earlier recessions. Now there’s a Democrat. That’s why Republicans in Congress supported government spending after the earlier recessions, but have vigorously opposed it this time. (After all, Republicans love certain kinds of government spending, despite what they claim.) Hypocrisy, foolishness, the desire to recapture the White House, combined with the failure of Democrats to make the case for more stimulus. It’s all those things and more. 

The chart is from “How Austerity Wrecked the American Economy” at Mother Jones. The author updates the story here.

Meanwhile, Paul Krugman sees a connection between the declining acceptance of evolution among Republicans and their rejection of stimulus spending: in order to be a good Republican these days, you have to deny climate change, evolution and modern economics.

Another economist who has repeatedly pointed out the stupidity of what we’ve been doing is Joseph Stiglitz. In a New York Times article called “In No One We Trust”, he explains how we’re losing trust in each other and our institutions as inequality increases. The article is especially interesting when he shows how a lack of trust and an excess of bad behavior got us into the economic mess we’re still trying to get out of:

Trust is becoming yet another casualty of our country’s staggering inequality: As the gap between Americans widens, the bonds that hold society together weaken. So, too, as more and more people lose faith in a system that seems inexorably stacked against them, and the 1 percent ascend to ever more distant heights, this vital element of our institutions and our way of life is eroding….

The banking industry is only one example of what amounts to a broad agenda, promoted by some politicians and theoreticians on the right, to undermine the role of trust in our economy. This movement promotes policies based on the view that trust should never be relied on as motivation, for any kind of behavior, in any context. Incentives, in this scheme, are all that matter.

Which Side Are You On?

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Journalist Edward McClelland lays it on the line at Salon in “The ‘Middle Class’ Myth: Here’s Why Wages Are Really So Low Today”.

Some key points:

In the relatively recent past, an “unskilled” worker straight out of high school could get a union job and earn enough to buy a car and rent an apartment.

Workers aren’t simply paid according to their skills. They’re paid based on how much they can get from their employers.

The anti-union movement’s biggest victory hasn’t been the elimination of existing union jobs. It’s been preventing the unionization of other jobs.

Companies claim that low-paid jobs were never meant to support a family or lead to a career, but that’s simply a way to justify paying low wages. And they can do that because they don’t have to deal with unions.

Today’s workers have to stop thinking of themselves as middle-class, just because they don’t work in a factory or they went to college: “Unless you own the business, you’re working class”.

“The smartest people I ever met were guys who ran cranes in the mill…They were smart enough, at least, to get their fair share of the company’s profits.”

It’s an excellent article and not very long. 

While we’re on the subject, Pete Seeger sings “Which Side Are You On?”, written in 1931 by Florence Reece, the wife of a union organizer, during Kentucky’s Harlan County War.

PS – Wikipedia says Florence Reece took the melody from a Baptist hymn. Pete Seeger was only 12 in 1931.

Crime in the Suburbs, Part 2

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Here’s a heart-warming story from the police blotter section of our local paper:

On Nov. 25, between 8:45 and 9 a.m., someone took items from an unlocked vehicle. Reported stolen were a Tory Burch purse valued at $500, a Louis Vuitton wallet worth $900, numerous gift certificates worth $200, credit and debit cards [and] two checkbooks.

It’s good to see the wealthy giving to the less fortunate, especially now, “the most wonderful time of the year”.  

Moe Should Have Watched “The Wire”

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David Simon, the creator of The Wire, spoke recently at a conference in Australia. The Guardian has an edited transcript of his talk here. Some selected paragraphs:

You know if you’ve read Capital or if you’ve got the Cliff Notes, you know that [Marx’s] imaginings of how classical Marxism – of how his logic would work when applied – kind of devolve into such nonsense as the withering away of the state and platitudes like that. But he was really sharp about what goes wrong when capital wins unequivocally, when it gets everything it asks for.

That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress.

From this moment forward unless we reverse course, the average human being is worth less on planet Earth. Unless we take stock of the fact that maybe socialism and the socialist impulse has to be addressed again; it has to be married as it was married in the 1930s, the 1940s and even into the 1950s, to the engine that is capitalism.

Mistaking capitalism for a blueprint as to how to build a society strikes me as a really dangerous idea in a bad way. Capitalism is a remarkable engine again for producing wealth. It’s a great tool to have in your toolbox if you’re trying to build a society and have that society advance. You wouldn’t want to go forward at this point without it. But it’s not a blueprint for how to build the just society. There are other metrics besides that quarterly profit report.

And that’s what The Wire was about basically, it was about people who were worth less and who were no longer necessary, as maybe 10 or 15% of my country is no longer necessary to the operation of the economy. It was about them trying to solve, for lack of a better term, an existential crisis. In their irrelevance, their economic irrelevance, they were nonetheless still on the ground occupying this place called Baltimore and they were going to have to endure somehow.

Moe really should have watched The Wire.