Tag Archives: income inequality

Will we be better off ruled by the 1%?

Summary: This post asks if the project to reform America is not just futile but misguided. Yesterday’s post explained how American’s political system has become dysfunctional from the conflict for control between the upper middle class (the professional and managerial classes I call the “outer party”) and the 1% and its allies (especially the wealthy and leadership classes I call the “inner party”). Today we follow this reasoning to its surprising but logical conclusions. Leave your reaction in the comments. {1st of 2 posts today.}

“Most importantly, I no longer believe that freedom and democracy are compatible. … The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

— Peter Thiel (Silicon Valley billionaire) in “The Education of a Libertarian“, CATO Unbound, 13 April 2009. You’ll seldom here the voice of the 1% more clearly.

We are the future

(1)  What happens if the 1% wins?

The great challenge of the 1% will be maintaining social cohesion under their rule. We must feel that their rule is legitimate even if runs against our interests. Medieval kings did this with the support of the Church, convincing the people of the divine right of kings.

I suspect they will rely on two pillars of popular support. The social conservatives are the equivalent of the European right-wing parties’ “throne and altar” alliance, who give their support in exchange for mostly symbolic support. Libertarians provide a second pillar, who will cheer as the 1% strip mine America and social mobility declines from its already low level — and give their support to the 1% in exchange for almost nothing.

Life will continue under their rule, with few changes. It will be more difficult and insecure for us; it will be more fun for the 1% (i.e., they’ll have more power). We of the outer party will still read the news, cheering our tribe and booing the others — staying well-informed, although eventually we’ll no longer remember why we bother.

They will eliminate much of the regulations on people’s behavior, for good or ill, because they don’t care what the masses do. Their rule could be stable for a long term.

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Complaints about air travel are the cries of a dying middle class

Summary: The airline industry is a tale of New America. Deregulation, cheap fares allowing more people to travel but with increasingly poor service and rising complaints. It’s an oft-told story of stupid people unaware of the consequences to their behavior. But that’s a shallow view that misses the real significance of these trends.  {1st of 2 posts today.}

Airlines in the past

 

Contents

  1. Unexpected fruits of deregulation.
  2. Interpreting the whining.
  3. It’s the cry of a dying middle class.
  4. Conclusion: expect more of this.
  5. For More Information.

 

(1)  Unexpected but logical fruits of airline deregulation

The rollback of the New Deal began with deregulation of the airlines (except for safety) — done by the President who began the conservative revolution, which his successor accelerated: James Carter. This allowed far more people to fly, people formerly limited to buses, trains and cars.  The unexpected side effect: service has slowly and steadily deteriorated. (There are 25 years of data from the Airline Quality Ratings database run for DoT, with many studies of it by experts such as Dean E Headley — but I can find no analysis of the trend over that period — probably for the obvious reason).

Why has service deteriorated while traffic rose (from 191 billion passenger-miles in 1980 to 580 billion in 2012)? It wasn’t the speed of the increase. In the 20 years before deregulation traffic rose over twice as fast as in the 20 years afterwards — with the airlines still providing excellent service. It’s not that the airlines are rapacious and greedy — their industry has an ugly combination of high volatility (in technology, competition, and revenues) and low profitability. During the dark days after 9/11 it was said that the industry had accumulated no net profits since the Wright brothers.

The answer is obvious: customers give their business on the basis of flight convenience and cost. Carriers give people what they want: cheap travel. Since they have no wizards, that means bare bones service — with cycles of cost-cutting, each one clipping off cost and satisfaction. The next cycle features a new class more crowded than economy.

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How to fix America’s tangles of pathology

Summary:  Social reformers design better societies but seldom consider the inevitable constraints on what’s possible. Economists often conceptualize these as trilemmas: 3 good things where you get to have only two. In today’s post SR Waldman explains a fundamental dilemma in politics. It’s long but worth reading.  {1st of 2 posts today.}

Tangles of pathology

By Steve Randy Waldman at Interfluidity, 8 April 2015.
Posted with his generous permission.

"Affe mit Schädel" ("ape with skull") by Hugo Rheinhold (c.1893).

“Ape with Skull” by Hugo Rheinhold (c.1893).

Contents

  1. A trilemma for social reformers.
  2. The necessity of social pathology in America.
  3. Why America’s solution works so well.
  4. Building in pathology.
  5. A history of pathology.
  6. Conclusions.
  7. About the author.
  8. For More Information.

 

(1)  A trilemma for social reformers

Trilemmas are always fun. Let’s do one. You may pick two, but no more than two, of the following:

  • Liberalism
  • Inequality
  • Non-pathology

By “liberalism”, I mean a social order in which people are free to do as they please and live as they wish, in which everyone is formally enfranchised by a political process justified in terms of consent of the governed and equality of opportunity.

By “inequality”, I mean high dispersion of economic outcomes between individuals over full lifetimes.  We’ll be more directly concerned with “bottom inequality”, or “relative poverty” in OECD terms, rather than “top inequality” (the very outsized incomes of the top 0.1% or 0.001%).

By “non-pathology”, I mean the absence of a sizable underclass within which institutions of social cohesion — families (nuclear and extended), civic and religious organizations — function poorly or at best patchily, in which conflict and violence are frequent and economic outcomes are poor. From the inside, a pathologized underclass perceives itself as simultaneously dysfunctional and victimized. From the outside, it is viewed culturally and/or morally deficient, and perhaps inferior genetically. Whatever its causes and whomever is to blame, pathology itself is a real phenomenon, not just a matter of false perception by dominant groups.

This trilemma is not a logical necessity. It is possible to imagine a liberal society that is very unequal, in which rich and poor alike make the best of their circumstances without clumping into culturally distinct groupings, in which shared procedural norms render the society politically stable despite profound quality of life differences between winners and losers. But I think empirically, no such thing has existed in the world, and that no such thing ever will given how humans actually behave.

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Scary lessons for America from pre-revolutionary France.

Summary: Today we look at 18thC France, and speculate about our future. They too had their 1%, hungry for wealth and power. In a time of troubles, they refused to compromise and so plunged France into a long bloody transition to a new regime. Our situation is very different, but there are a few ominous similarities.  {1st of 2 posts today.}

“It’s all about power and the unassailable might of money.”
— E. P. Arnold Royalton, the great 21st century industrialist in “Speed Racer” (2008).

"Liberty Leading the People", Eugène Delacroix (1830).

“Liberty Leading the People”, Eugène Delacroix (1830).

Contents

  1. Pre-revolutionary France.
  2. America today.
  3. Differences and similarities.
  4. Books by GOP candidates.
  5. For More Information.

(1)  Pre-revolutionary France

There was desperate need for financial reform of the French government in the late 18thC, but deep institutional failure prevented reform. King Louis XVI wanted reform, especially the nobility and clergy to pay taxes, but the nobility and clergy blocked change through the parlements (high courts) and Assembly of Notables (1787) — an opposite outcome to that of the previous great crisis in 1626.

Out of easy options, the King called the Estates General in 1789. The 3 Estates each had one vote: the nobility, the clergy, the commons. This might have been the last opportunity to save France from revolution. Each Estate prepared a list of grievances (Cahiers de doléances).

The nobility desired a weaker King: limitations on royal absolutism, guarantee of individual liberties, and taxes only with approval of the Esates General. For this they were prepared to give almost nothing, and had little interest in lightening the burden on the commons. They wanted compensation for abolishing the corvée (forced unpaid labor) and capitaineries (game preserves of the King and nobility). Their opening offer to the commons: nothing.

With no room for negotiation, the Estates General immediately deadlocked. On June 17 the Third Estate, plus defectors from the other two, declared themselves the National Assembly. On June 20 the King locked them from the Salle des États. They relocated to the Royal Tennis Courts, and swore the Tennis Court Oath. The revolution had begun.

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A graph showing the end of America as we know it.

Summary: This is third in a series showing that we’re losing America. This post examines rising inequality of income, one of the major forces reshaping our society and politics. It’s not a class war if we don’t fight back.  {2nd of 2 posts today.}

The one graph that ties together the strands making a New America.
Click to enlarge.

The Great Decoupoling

Andrew McAfee, 12 Dec 2012 — Click to enlarge.

This one powerful but dense graph shows the transformation of what we know of as America — born in the fires of the New Deal, WWII, and the civil rights revolution — into the America of the Gilded Age. The top 2 lines (blue and grey) show America’s increasing economic strength: rising labor productivity and GDP. The bottom two show what we get from that (private sector jobs and median household income).

Here you see the slowly widening break in the early 1980s — the Reagan years, an inflection in so many American political and economic trends — as the 1% siphoned off an increasing fraction of America’s income. That growing gap gives them ever more power, allowing them to restructure America’s institutions to better serve them.

Labor unions were crushed. Workers increasingly became contingent, disposable — either “independent contractors” (often de facto employees without the protections of formal employment), or temps, or just pawns to be fired as needed to boost profits. Open borders brought in more workers to drive down wages (e.g., H-1B visas for skilled workers). Enforcement of labor regulations were gutted, allowing growing exploitation of workers, such as illegally treated cheerleaders in professional sports, plus dubiously legal “managers” (no overtime), unpaid interns, and not-independent independent contractors.

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Uber gives Americans a float to hold in the rapids of the New American economy

This post has been moved to Wolf Street: Howling about Business and Finance.

See the Billionaire’s Dream: Uber’s New American Economy.  Who gets the crumbs in the ironically named “Sharing Economy”?

If you have never visited Wolf Street, it’s worth a look.

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If we all saw the same America, perhaps we could fix it.

Summary: After scores of posts attempting to discover the core of America’s problems, recent events highlight one candidate — we don’t see the same world. It makes us easy to rule. We are a gift to the 1%.

“Everyone is entitled to his own opinion, but not his own facts.”

— Attributed to Daniel Patrick Moynihan.

Speaking for our rulers (Left & Right), Karl Rove explains their more dynamic view:

”We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.”

— From “Faith, Certainty and the Presidency of George W. Bush” by Ron Suskind, New York Times Magazine, 17 October 2004.

Its getting dark, too dark to see

The clock’s running out on us.

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Contents

  1. In an oligarchy every peon has their own facts.
  2. Why citizens need clear vision.
  3. For More Information.

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(1) In an oligarchy every peon can have their own facts.

When starting the FM website I thought we’d present facts that would provoke debate in the comments about their interpretation and analysis, and the resulting recommendations. People would express their different values and forecasts as we ran through the OODA loop, starting with observations, and discussing our Orientations, Decisions, and Actions.

I was naive. We almost never got beyond debate about facts. No matter how authoritative the sources or clear the data, partisans of Left and Right came out to debate the facts. Or more often, ignore them while denying them. I have often written about the similar reasoning and behavior of Left and Right in America (reliance on propaganda, reliance on ideology over facts) — both are Americans, after all — and this is the clearest demonstration.

Both sides love their facts, however fake. Scientists speak to us about the warming pause — its causes and likely durationwhile Leftists deny their work (literally, they refuse to see it). Leftists build hysteria over a phony campus rape epidemic.

The Right too has a long history of refusing to see reality. The fiercest discussions on the FM website since 2003 were push-backs to my posts showing that the US was failing in Iraq and Afghanistan; millions still believe we won. Also provoking rebuttals were posts early 2008 about the ample data showing that the US was in recession (the NBER made it official in November 2008). As late as Summer they denied it — believing no recession was possible under Bush Jr. See these quotes from June 3 and some weird ones here.

Many on the Right believed that the government deliberately understates the rate of inflation. Some even pay Shadowstats to confirm their beliefs, despite the overwhelming evidence otherwise (details here). Others have crazy beliefs about Obama — that he’s a foreigner, Muslim, radical Leftist. Or that Saddam did have WMDs, and was an ally of al Qaeda.

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