Tag Archives: income inequality

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).


  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.



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%. And the clock’s running out on us.

Its getting dark, too dark to see

“Everyone is entitled to his own opinion, not his own facts.”
— Attributed to Daniel Patrick Moynihan.


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

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

”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.

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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The hidden message in the jobs report: rising inequality now a structural feature of America.

Summary: Journalists often report news as a horse race. For example, did a Dem or GOP win the election?  This obscures important trends showing the changing nature of America. So it is with the December jobs report. Looking below the headlines shows that years of conservatives’ work has produced a new America, one with increasing and structural inequality. Unlike the post-WWII era, economic growth does not decrease income inequality (although it increases during recessions). Read the numbers and weep, or do something about it.



The December jobs report show that years of well-funded, carefully planned effort by the 1% have produced a rich harvest for the 1%. Public policy has shifted from fostering growth to re-distribution — from the bottom 80% to the top 1%.  A few pictures tell the story, showing how economic growth no longer provides much benefit to workers. We get more jobs, often at low wages with few or no benefits — but little or no growth after inflation.  First, let’s look at the top line: job growth has increased slightly during the past few quarters.


BLS: monthly job growth

Here’s another perspective, showing the growth rate. Since the population grows, the same number of new jobs is slowing percentage growth. The growth rate has accelerated, but only slightly.

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Connect the dots to see why wages aren’t growing for most Americans

Summary: America has become increasingly destabilized during the few decades, as the 1% grows stronger and seizes resources to grow still stronger. This post shows them at work shifting income from workers’ wages to corporate profits. Inequality doesn’t just happen; it results from people making decisions under a specific political and social conditions. In the past we reversed this process. This ended the Gilded Age, creating a broad middle class and the society we think of as America (quite unlike the nation of the previous century). We can do so again.

Innovation of new forms of society and technology. It is the key to our progress. It has allowed us to evolve from naked hunter-gatherers to the dominant species on this planet. This process is slow, normally taking hundreds or even thousands of years. But occasionally evolution leaps forward.

— A slight tweak of Professor Xavier’s words from the title sequence of the movie “X-Men” (2000)

Growing inequality: "Piketty Split", The Economist, 18 November 2014

From “Piketty Split“, The Economist, 18 November 2014


Homeostasis (aka negative feedback) rules “normal” life, defeating the predictions of doomsters who extrapolate current trends to collapse. Instead countervailing forces, including intelligent collective action through political, business, and social organizations, find new ways to maintain stability and growth. But sometimes we get positive feedback, when a change produces conditions that continue and accelerate the trend — and the mechanisms break that should maintain balance.

Marx saw such a process at work in 19th century industrialization. He forecast revolution for western nations as the inevitable outcome of the Gilded Age, as the flow of national income shifted from workers to those who own the means of production. He was wrong then, as — after much conflict — we found ways to more equitably distribute income without civil war. Perhaps Marx was not wrong, just early. Again we face the same challenge, as the 1% works to reshape America into a plutocracy.

During the past few years many economists confidently have predicted an acceleration in wage growth. But wage growth for most Americans (below the top quintile) remains only slightly above inflation. We see the reason every day in the news, as the 1% uses their power to boost their profits at their workers’ expense. The process accelerates as they grow stronger — and seize more — while we grow weaker.

Here are nine of our stories, stories describing the birth of a New America. Connect the dots to see the explanation of why most of the gains in America’s national income since 1980 have gone to the 1%. If continued, this trend will create a New America.

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America enjoys a time of sunshine in Hell. Let’s use the time wisely.

Summary: I try in these pages to convey the extraordinary oddness of our time, when a great nation carelessly destroying its strength and prosperity. Examples are easily found around us. The disregard for science by both Left and Right. Our mad foreign policy, multiplying enemies while discouraging friends. Our high-risk macroeconomic policies. Our apathy to the rot of both our infrastructure and our political regime. The restructuring of our society to build a New America on the ruins of the old. It’s an exciting time, with great trends buried amidst the trivia of the news! Today we try a new perspective from which to see these things more clearly.


America is powerful, our military supreme, our hegemony almost unchallenged.
We kill at will around the world.
We overthrow governments and occupy nations at our whim, careless of the consequences.
Our tech is the finest.
Our economy is the largest & among the strongest.
Yet increasing numbers of Americans fear we’re on the wrong path (see polls).
Here’s one story about America today.
A powerful and evocative story of our time by Michael Hartnett (Chief Strategist at BofA).
Borrowed from his report of 29 May 2014, it’s used in a different context than he intended.

Sunshine in Hell

The vast majority of economists expect the US economy soon to resume “normal” growth, as they have since the crash. That’s quite astonishing since GDP has been slowing, not accelerating, from its post-crash sluggish trend of 2.2% — despite the third and largest round of quantitative easing. In 2012 GDP rose 2.8%; in 2013 +1.9%; and now economists estimate growth in 2014 to be slower than 2013 (the IMF expects +1.7%, assuming the second half speeds up to 3%+). It’s our slowest recovery ever by most metrics, one in which median real wages have not increased since before the recession began in 2007.

However anemic, the recovery has kept the public quiet while a New America is built around us. But we’re not all participating equally.

For example, consider our passive acceptance to the great looting of American business. First Private Equity firms perfected a new mode of capitalism: parasitism. Acquire businesses — hollow them out by throttling back capex and R&D (see this NYT article, the numbers look worse as % profits) — leverage them up — extract the cash — then sell them off. Now senior corporate executives have learned to do the same with public companies. Cut capex and R&D — leverage the company up — then  extract the cash via the Triangle Trade of executive stock options to stock to buybacks. The result is a rapid increase of inequality, a host of executives in the 1%, and an America incapable of rapid growth.

It’s one of the great engines of inequality in our society, along with the increasingly dysfunctional education system and the flat tax system. For more information see the end of this post.

Looking at the 99%

We see the effects of growing inequality all around us, if we care to look. Not just in the conspicuous spending of the nouveau riche, but in the plight of the 99%. As in these stories from today’s news:

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