Back to the future in New America: our new class structure

Summary: One of the news media’s master narratives is that the dark evolution of America just happens, much like the myth of the “invisible hand”. Inevitable. Resistance is futile. All is for the best in this, the best of all possible worlds. In fact most of the drivers of rising inequality are politics conducted by other means, invisible means. This is not new in America. We fought these battles before in the often-violent unionization struggles that accelerated after the Civil War (see section 5d here). Times differ, but we can win again.

“There’s class warfare, all right. But it’s my class, the rich class, that’s making war, and we’re winning.”
— Warren Buffet, quoted in the New York Times, 26 November 2006

Unbalanced Wage Scales
Unbalanced Wage Scales

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Content

  1. The emerging class structure of New America
  2. New America is made for corporations, not workers
  3. Corporations make millions from art while artists starve
  4. Academia adopts corporate comp systems: elites and peons
  5. For More Information
  6. The 99% need a raise

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(1)  The emerging class structure of New America

Increasing inequality of wealth and income plus changes in the structure of employment combine to return America to the 19th century class structure:

  • the top few percent who own almost everything — the bourgeoisie
  • elites with secure professions, high stable incomes, modest wealth
  • the petite bourgeoisie — small business owners
  • the proles, mostly with little job security and little or no wage growth

The major developments since 1980 have been downwards mobility of workers, even those who think of themselves as professionals and highly skilled workers. These stories fill the news media, although usually disguised. Here are three. Understanding these changes is the key to stopping them.

(2)  New America is made for corporations, not workers

Wages Stagnate as US Manufacturers Reap Record Profits“, Bloomberg, 21 November 2013 — Excerpt:

Boeing’s quest for concessions and employees’ opposition exposed a fault line in U.S. industry’s post-recession comeback: Even with hiring and output robust enough to be dubbed a manufacturing renaissance by President Barack Obama, workers are falling behind. Factory pay hasn’t kept pace with inflation and has fallen 3% on that basis since May 2009, while average pay for all wage earners slid only about 1%.

“We need to focus on how many jobs there are that give an adult a chance to earn a decent living,” said Gordon Lafer, an associate professor at the University of Oregon’s Labor Education and Research Center in Eugene. “Too much of the discussion has been about the number of jobs, and that’s obviously important, but there’s also a crisis in the quality of jobs.”

Boeing said it needed labor givebacks to keep the Seattle area as the home of the 777X jet, a new model with more than $95 billion in orders since September. Union workers said Boeing needed to share more of the wealth they help create. “This is really a symbol of what’s going on in this whole country,” said Machinist Thomas Campbell, 40. “We’re losing middle-class jobs.”

… The average hourly wage in U.S. manufacturing was $24.56 in October, 1.9% more than the $24.10 for all wage earners. In May 2009, the premium for factory jobs was 3.9% . Weighing on wages are two-tier compensation systems under which employees starting out earn less than their more experienced peers did, and factory-job growth in the South.

Since the U.S. recession ended in June 2009, for example, Tennessee has added more than 18,000 manufacturing jobs, while New Jersey lost 17,000. Factory workers in Tennessee earned an average of $54,758 annually in 2012, almost 10% less than national levels and trailing the $76,038 of their New Jersey counterparts, according to the Bureau of Labor Statistics.

(3)  Corporations make millions from art while artists starve

The new media created by Silicon Valley benefits corporations and consumers, the standard New America system. Workers have low wages and insecure incomes. The Huffington Post takes this to an extreme, paying its writers nothing.

My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89, Less Than What I Make From a Single T-Shirt Sale!“, David Lowery (lead singer of Cracker), The Trichordist, 24 June 2013 — Opening:

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Pandora and the box
Surprise, it’s empty! By Marta Dahlig

As a songwriter Pandora paid me $16.89* for 1,159,000 play of “Low” last quarter.  Less than I make from a single T-shirt sale.

… Soon you will be hearing from Pandora how they need Congress to change the way royalties are calculated so that they can pay much much less to songwriters and performers.

For you civilians webcasting rates are “compulsory” rates. They are set by the government (crazy, right?). Further since they are compulsory royalties, artists can not “opt out” of a service like Pandora even if they think Pandora doesn’t pay them enough.

The majority of songwriters have their rates set by the government, too, in the form of the ASCAP and BMI rate courts – a single judge gets to decide the fate of songwriters (technically not a “compulsory” but may as well be).  This is already a government mandated subsidy from songwriters and artists to Silicon Valley. Pandora wants to make it even worse.  (Yet another reason the government needs to get out of the business of setting webcasting rates and let the market sort it out.)

Of course Pandora wants to pay even less: “Should Pandora Pay Less in Music Royalties?“, Bloomberg, 1 July 2013

Photo by Marta Dahlig of Poland.

(4) Academia adopts corporate comp systems: elites and peons

Also note how this makes a mockery of the claim that higher education is the route to security and prosperity in New America.

How Academia Resembles a Drug Gang“, Alexandre Afonso, 21 November 2013 — presented on November 19 at the European University Institute’s Academic Careers Observatory Conference. Excerpt:

In 2000, economist Steven Levitt and sociologist Sudhir Venkatesh published an article in the Quarterly Journal of Economics about the internal wage structure of a Chicago drug gang. … The title of the chapter, “Why drug dealers still live with their moms”, was based on the finding that the income distribution within gangs was extremely skewed in favor  of those at the top, while the rank-and-file street sellers earned even less than employees in legitimate low-skilled activities, let’s say at McDonald’s. They calculated $3.30 as the hourly rate, that is, well below a living wage (that’s why they still live with their moms). [2]

If you take into account the risk of being shot by rival gangs, ending up in jail or being beaten up by your own hierarchy, you might wonder why anybody would work for such a low wage and at such dreadful working conditions instead of seeking employment at McDonalds. Yet, gangs have no real difficulty in recruiting new members. The reason for this is that the prospect of future wealth, rather than current income and working conditions, is the main driver for people to stay in the business: low-level drug sellers forgo current income for (uncertain) future wealth.

Rank-and file members are ready to face this risk to try to make it to the top, where life is good and money is flowing. It is very unlikely that they will make it (their mortality rate is insanely high, by the way) but they’re ready to “get rich or die trying”.

With a constant supply of new low-level drug sellers entering the market and ready to be exploited, drug lords can become increasingly rich without needing to distribute their wealth towards the bottom. You have an expanding mass of rank-and-file “outsiders” ready to forgo income for future wealth, and a small core of “insiders”  securing incomes largely at the expense of the mass. We can call it a winner-take-all market.

Academia as a Dual Labour Market

The academic job market is structured in many respects like a drug gang, with an expanding mass of outsiders and a shrinking core  of insiders. Even if the probability that you might get shot in academia is relatively small (unless you mark student papers very harshly), one can observe similar dynamics.

Academia is only a somewhat extreme example of this trend, but it affects labour markets virtually everywhere. One of the hot topics in labour market research at the moment is what we call “dualisation” [3]. Dualisation is the strengthening of this divide between insiders in secure, stable employment and outsiders in fixed-term, precarious employment. Academic systems more or less everywhere rely at least to some extent on the existence of a supply of “outsiders” ready to forgo wages and employment security in exchange for the prospect of uncertain security, prestige, freedom and reasonably high salaries that tenured positions entail [4].

How can we explain this trend? One of the underlying structural factors has been the massive expansion in the number of PhDs all across the OECD. Figure 1 shows the proportion of PhD holders as a proportion of the corresponding age cohort in a  number of OECD countries at two points in time, in 2000 and 2011. As you can see, this share has increased by about 60% in 11 years … Since 2000 the number of OECD-area doctorates has increased at an average of 5% a year.

So what you have is an increasing number of brilliant PhD graduates arriving every year into the market hoping to secure a permanent position as a professor and enjoying freedom and high salaries, a bit like the rank-and-file drug dealer  hoping to become a drug lord. To achieve that, they are ready to forgo the income and security that they could have in other areas of employment by accepting insecure working conditions in the hope of securing jobs that are not expanding at the same rate.

Because of the increasing inflow of potential outsiders ready to accept this kind of working conditions, this allows insiders to outsource a number of their tasks onto them, especially teaching, in a  context where there are increasing pressures for research and publishing. … In many countries, universities rely to an increasing extent on an “industrial reserve army” of academics working on casual contracts because of this system of incentives.

To understand the life of a prole in academia:

(5)  For More Information

(a)  The big picture, posts about reforming America:

(b)  Posts about the conflict between labor and capital:

(c)  Posts about inequality:

  1. A sad picture of America, important for us to understand, 3 November 2008 — About social mobility
  2. An opportunity to look in the mirror, to more clearly see America, 10 November 2009
  3. Graph of the decade, a hidden fracture in the American political regime, 7 March 2010
  4. America, the land of limited opportunity. We must open our eyes to the truth., 31 March 2010
  5. Modern America seen in pictures. Graphs, not photos. Facts, not impressions., 13 June 2010
  6. Jared Bernstein examines the economic impact of raising taxes on high-income households, 30 April 2012
  7. How clearly do we see the rising inequality in America? How do we feel about it? Much depends on these answers., 27 September 2012
  8. Ugly truths about income inequality in America, which no politician dares to say, 2 October 2012
  9. Glimpses of the New America being born now, 18 June 2013
  10. Why Elizabeth Bennet could not marry Mr. Darcy. Nor could your daughter., 12 July 2013
  11. For Thanksgiving, Walmart shows us the New America, 19 November 2013

(d)  Posts about reforming America:

  1. The project to reform America: a matter for science or a matter of will?, 16 March 2010
  2. Can we reignite the spirit of America?, 14 September 2010
  3. The sure route to reforming America, 16 November 2010
  4. We are alone in the defense of the Republic, 5 July 2012
  5. A third try: The First Step to reforming America, 28 May 2013
  6. The bad news about reforming America: time is our enemy, 27 June 2013
  7. Understand our problem before you prescribe a cure for America. We’ve gone mad., 17 September 2013
  8. How to recruit people to the cause of reforming America, 5 November 2013

(6)  The 99% need a raise

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Income Inequality
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33 thoughts on “Back to the future in New America: our new class structure

  • Your graph in point 6 is revealing but incomplete. Minimum wage guy might lose up to 25% of income (7% Social Security, 15% Federal Income, 3% State Income) in taxes depending on a lot of factors. Middle income guy WILL lose something like 35% in taxes (assuming dual income family). CEO guy will lose somewhere between 12-15% in taxes.

    If you recalculate the hourly wage, assuming the worst case:
    – Low wage earner is earning 5.44 per hour and needs 41 minutes to earn the gallon of milk.
    – Middle income guy is earning 10.77 per hour and needs 21 minutes to earn the gallon of milk.
    – The CEO earns 17,136 per hour (the equivalent of roughly 3,150 minimum income earners after taxes) and still works 0.01 seconds to earn the milk.

    The scary thing is that when I talk to Tea Party people about this disparity of income, they automatically and uniformly explain (in order) that:
    1) The CEO is EARNING his money while the low wage earners are being given their wages rather than earning them
    2) If we only reduced taxation on wealthy people all of society would benefit
    3) Tea Party members need better access to guns

    Like

    • Pluto,

      “Your graph in point 6 is revealing but incomplete.”

      Is it possible to make a graph “complete” in the sense you use, with all relevant information?

      There is always more detail, new perspectives, to show the full reality. Of course, this post was already 1800 words — over my 1,000 word max. Which is crazy long by internet standards. I read that the average post is 250 words (I read it on the Internet, so must be correct).

      Like

    • FM, sorry you took my comment in the way that you did. That wasn’t my intent at all. I have some small understanding how much effort these articles require and I am deeply grateful that you write them.

      When I wrote my first comment, I was just glad to be able to add something to your article. I did not mean to imply that you needed to add more to the article.

      Like

    • The reason management pays so well is that it is incredibly hard. If it wasn’t companies on the average would be paying less for it.

      It looks easy from the outside. I have been on the inside. It is not. BTW I’m very good with small teams. I’m not so good at larger management problems.

      Like

    • M Simon,

      “The reason management pays so well is that it is incredibly hard. If it wasn’t companies on the average would be paying less for it.”

      That is little more than ideology speaking.

      There is a very large body of research that shows that the massive increase in pay of senior managers (both profit and non-profits) since 1980 is unrelated to any measure of background or performance. Especially unrelated to performance.

      This is obvious to anyone who reads the newspapers without ideological blinders.

      Ditto if one thinks about this. Have senior jobs become more difficult during the past few decades to justify a massive increase in compensation vs other workers in the organization?

      Like

    • FM,

      Ideology? As I said I have PRACTICAL EXPERIENCE.

      “Have senior mgmt. jobs become more difficult?” Wrong question. “Has supply kept up with demand?” is the right question.

      And a question for you. You are obviously good at mgmt. Why not apply for one of those overpaid positions and offer to do it for 1/2 price? There must be 100,000 out there who would be willing to do that. So why are prices escalating and not stable or declining?

      My take is that there is not enough very high caliber talent around. It is that last .1% difference in talent that is worth the multiples. Unfair? Ask Michael Jordan.

      In sports we understand. In business we don’t.

      How much was Steve Jobs really worth? And why didn’t some company pick him up in ’77? I was a part of the computer revolution back then. I could see the value of Jobs. How did everyone else miss it? Because you never know for sure if he can manage a billion dollar company until he does. And not many get the opportunity. Supply and demand.

      Like

    • M Simon,

      Wow. Talk about a disconnect from reality, despite the massive research so well-known about these issues.

      (a) “’Have senior mgmt. jobs become more difficult?’ Wrong question. ‘Has supply kept up with demand?’”

      1. There is zero evidence that there is any shortage of senior management talent.
      2. Companies in other developed nations have not found it necessary to pay such a large fraction of profits to their senior executives.
      3. There is ample evidence, shown in many studies, that compensation of senior executives bears little or no relationship to their performance.

      (b) “You are obviously good at mgmt. Why not apply for one of those overpaid positions and offer to do it for 1/2 price?”

      Wow. No sign here of the “practical experience” you claim. It’s a non-performance club. I might as well apply to Queen Elizabeth to become an Earl.

      (c) “There must be 100,000 out there who would be willing to do that. So why are prices escalating and not stable or declining?”

      Rather than fantacizing, you might read some of the vast body of research on this subject. It’s called “rent-seeking” by economists. CEOs exploit structural weaknesses in US corporate governance to transfer corporate resources to themselves.

      (d) “My take is that there is not enough very high caliber talent around.”

      Yes, fantasy is fun.

      (e) “And why didn’t some company pick him up in ’77? I was a part of the computer revolution back then. I could see the value of Jobs.”

      You are a hero in your own story. Fantasy is fun!

      Like

  • is there any info on how much money the recording label makes off each record play in 3? didn’t seem to be any in the source article.

    it’s also worth noting that the source material of point 3 skews the debate of artist versus corporation in a way that makes it seem like pandora was created to screw artists out of royalties–completely ignoring the fact that consumer habits of music consumption have changed (i.e. music listeners prefer free web based plays of song to physical media). are the margins of profit at pandora so high that they are getting fat off artists’ labor? i doubt it. i wonder why there isn’t as much complaint about the studio fees and downward pressure on royalties with sony or bmi or any other large label.

    Like

    • Underscore,

      All valid points. I know nothing about music, and less about it as a biz, so didn’t want to get into the details. The first article touched upon some of the points you raised.

      But there is a larger point here. Pandora and other online companies are making money. Perhaps not as much as they’d like, but that’s always true (e.g., talk to a supermarket exec about their razor-thin margins and super-competitive biz). And I strongly suspect the top execs are Pandora (and even more so its VC backers) are doing quite well.

      But the people creating the product are not making money. They either have day jobs or are mostly starving. This is becoming true of an increasingly large number of businesses.

      The extreme cases are interns — entry-level college grads expected to work for nothing. Nothing. And writers (e.g., Huffington Post) also expected to work for free.

      This is not a system that works for us. It’s a 21st century peonage. It is not happening due to some invisible hand (Adam Smith probably spins in his grave every time some right-wing hack misuses that phrase).

      But more of this for my Thanksgiving Day post. Nothing will change until we more from cold analysis to hot anger. As the song goes (in a different context) we need to set fire to the rain. No matter how unpromising the circumstances…

      Like

  • What concerns me is the fact that — as someone observed in a recent comment in response to one of FM’s posts — the 1% control all the channels of communication in this country. Over the past ten years or so, the groundwork which could easily transform this country into a dictatorship has also slowly been built and moved into place with the result that most of us without realizing it have essentially already been fitted with invisible choke chains. (As an example, the perceptive person realizes that the police are no longer engaged in law enforcement…increasingly, what the police do is safeguard the interests of the 1%.)

    The reason why most Americans continue to remain unaware of all this is because the chains are being kept loose at present…the 1% have no particular reason to feel threatened by us. However, I worry that when (or if) the American people ever reach the point at which they’re prepared to put their political differences aside and join forces against the people who are at the root of most of their troubles, that’s when the machinery will power up and the collars will tighten. The 1% have a lot more power of various kinds — political power, financial power, and firepower — on their side than the rest of us do. We need to be prepared for the very great possibility that whatever efforts we make to fight back will almost certainly be met with violent resistance — people in power are almost always extremely loath to relinquish any of it, and more often than not will literally go to any means in order to protect it. I’m reminded of a quote attributed to John F. Kennedy — “those who make peaceful revolution impossible will make violent revolution inevitable” — and the trouble is that “those who make peaceful revolution impossible” currently exist on both sides.

    Like

    • Bluestocking,

      “the 1% control all the channels of communication in this country.”

      Why do people keep saying this when it is obviously false? They do not control two powerful media: email chains and the Internet. They don’t control talk radio in anything but a long-term sense. They don’t control local papers, when printing is so cheap. Etc, etc.

      If we devoted a fraction of the energy to reforming America as we do to inventing excuses for our inaction…

      Like

    • M Simon,

      “Women are socialists.”

      You have a career ahead of you as a speaker at meetings of the Republican Women’s clubs, explaining that women are socialists (“Yes, I mean YOU” he says firmly).

      And at Tea Party movement meetings. “Yes, these socialists in skirts are among you even now. Beware their honeyed words”.

      Please report back to us on your experiences.

      Like

    • Well. At individual points I’m obviously wrong. As a general trend I’m obviously correct. The Democrats are the woman’s party. The Republicans are the man’s party. And the Libertarians? Mostly men. You are confusing individual cases with statistical trends. Normally your thinking is clearer. I think all this 99%/1% clap trap has infected your thinking.

      The politics we are seeing is a reprise of the “robber baron” era. And there is a reason for that. Opportunity.

      “Concentration of wealth is a natural result of concentration of ability, and recurs in history. The rate of concentration varies (other factors being equal) with the economic freedom permitted by morals and the law… democracy, allowing the most liberty, accelerates it.” — Will and Ariel Durant

      So do you want liberty or a regulated economy? I prefer liberty. But liberty is a harsh discipline.

      Like

    • M Simon,

      Wow. Too many mistakes to deal with. I’ll start with the first and then move on.

      “The Democrats are the woman’s party. The Republicans are the man’s party. And the Libertarians? Mostly men. You are confusing individual cases with statistical trends.”

      That is too weird for words. From the Pew Polls, June 2012:

      Nonetheless, there continues to be a gender gap in party identification. Women are more likely than men to identify as Democrats (37% vs. 27%). That gap has changed little in recent years. Men are more likely than women to identify as independents (43% vs. 33%). About the same percentages of women and men affiliate with the GOP (24%, 25% respectively).

      It’s not clear if this reflects actual policy preferences, or a preference in labels. Many independents are straight-line party voters.

      Like

  • Your “milk” graphic is incomplete. The rich consume about 4X as much as the poor. What do they do with the rest of their money? Invest. Overtaxing the rich is eating the seed corn of future advances. People invest MORE wisely than governments (Solyndra).

    We are currently in a secular decline. Look up Kondatieff Wave Theory. When new investment opportunities (asteroid mining, biotech, etc.) start paying off big we will be on the rise again.

    Like

    • In addition your economic theory is just plain wrong. Going back to #6 (milk). What happens when the low wage guy is only worth $5 an hour? If you set the minimum wage higher than that you get an unemployed low wage guy. Either the business shrinks or the guy is automated out of a job. Either way the minimum wage is a job killer.

      We went through the same thing in the 1920 to 1940 era. Farm labor no longer had the value it previously did. It took a generation to work it out. Because people do not retrain easily. You can not turn a sales clerk (job killed off by Amazon) into a computer programmer.

      And as the “Amazons” show. The ‘net is killing jobs.

      If government wanted to do something useful it could shrink. The money is a factor but the hidden regulatory state is a huge unaccounted burden. The TEAs – much reviled here – are actually on the right track. It would be nice if they had some competition – “we should shrink government here” – “no, we should shrink it here.”

      Take one example – the endocannabinoid system in the body. A fuller exploitation of that system would be a revolution in health care – it regulates almost every system in the body. And treating it could be done cheaply with plant based medicine. But the plant is illegal. You can learn more about the endocannabinoid system at: “Cannabis For PTSD” at Rockford for Safe Access.

      Like

    • M Simon,

      (1). “In addition your economic theory is just plain wrong.”

      I am quite confident you have no idea what my economic theory is.

      (2). “Because people do not retrain easily.”

      We are seeing in America increasing pay inequality within sectors, industries, and even companies. Unrelated to technology. Obviously other factors are at work.

      (3). “If government wanted to do something useful it could shrink”

      There is no correlation among western nations between size of government and economic growth. Northern European nations, for example, are doing quite well. Your “economic theory” appears to be pure ideology, unconnected to actual evidence.

      Like

    • Simon,

      “And treating it could be done cheaply with plant based medicine. But the plant is illegal. You can learn more about the endocannabinoid system at: “Cannabis For PTSD” at Rockford for Safe Access.”

      That is a very weird statement. The reason using pot is illegal is not the leftists you rant about, but your right wing buddies.

      Like

    • M Simon,

      (1). “Your “milk” graphic is incomplete.”

      You are the second person on this thread to make that comment. As I said to Pluto, that’s silly. All graphics are “incomplete”. See above for details.

      (2). “What do they do with the rest of their money? Invest.”

      Truly the dumbest argument made for increasing inequality. It is wrong on multiple levels, no surprise as you assert it as a matter of faith — without evidence. In fact, private investment as a share of GDP has been falling as inequality rises.

      (2). “Overtaxing the rich is eating the seed corn of future advances.”

      Do you have any evidence for this? Historical data on changes of investment levels vs taxation over time? Cross-national data? Do people in the US invest more than those of Sweden?

      (3). “People invest MORE wisely than governments (Solyndra).”

      Do you have any evidence to support that statement? Pointing to a single example is quite daft. Hoover Dam, the Transcontinental railroad, the interstate highway system, and the many breakthroughs of the National Institutes of Health (NIH) are more representatives.

      (4). “Look up Kondatieff Wave Theory.”

      OK, this like like a tour through faux economics, talking about fictional pattern of commodity prices. Now you have hit all the high points. Not as much fun as Disneyland.

      (5). “When new investment opportunities (asteroid mining, biotech, etc.) start paying off big we will be on the rise again.”

      Yes, as we all know this is a cyclical dynamic. That does not mean we should sit on our butts, making no effort to influence events. The days of jubilee might be decades in the future; there is no way to reliably predict such things.

      Like

    • Well I don’t have right wing buddies. I have individual alliances on issues. The left is wrong on economic theory. The right is wrong on social theory. They both have similar foundations, “government can control….” No. It can’t. It can only add friction.

      I am fundamentally anti-statist. Not popular with any party. But I’m not a fan of “no state”. That is just an opening for power grabbers from inside or outside. So how much state? Hard to say. But I can say for sure “a LOT less than we have now”.

      Like

  • So how do we generally kill off sclerotic systems? War is the usual answer. It would be really nice if we were smarter than that. But it is usually very difficult to kill off entrenched interests who have captured government. The Progressives who started enlarging government around 1900 have done a number on us. And your prescriptions (the minimum wage is too low) sound very Progressive to me.

    And then there is the knowledge problem. No matter how good the Top Men, they cannot know what 300 million people know. And that includes their desires (value systems). Hayek discussed that in his Nobel Lecture “The Knowledge Problem”. The freer the market system the better it works. Look at ObamaCare – thousands of insurance plans killed off and replaced by 4. It will not end well. One size does not fit all. Also – the extra money captured by the new system will drive us into recession. Better- get the government out of health care regulation. The most government should do in the area is provide information.

    You don’t need to set the rain on fire. Doing it to government would be sufficient.

    Like

    • M Simon,

      “So how do we generally kill off sclerotic systems? War is the usual answer.”

      Your evidence? Certainly wars sometimes kill off “sclerotic systems”, but they also kill off functioning systems — as the victors are often the bigger — or just more skilled at war (e.g. the expansion of the Zulus, as weird a social system as I have ever seen).

      Societies also internally reform. Which is more frequent?

      Reading your comments I have the impression you are just making stuff up.

      (2). “The freer the market system the better it works.”

      So you are moving to the libertarian paradise of Somalia! Report back on its wonderfulness. You will learn that blind ideology is a poor guide to life.

      (3). “And your prescriptions (the minimum wage is too low) sound very Progressive to me.”

      This comment reads as if a rebuttal to the post. If so that’s a reading FAIL. The minimum wage mention was in Pluto’s comment.

      Also, I believe (I m/b wrong on this) that the *large* literature on the minimum wage as it has been implemented in the US shows no significant loss of jobs to offset its obvious benefits to workers.

      Like

    • “Somalia” you are making stuff up. It is no Libertarian paradise. Which I gather you have noticed.

      So how much state? A LOT less than we have now.

      And do you know who minimum wage raises really benefit? Workers whose contracts are tied to the minimum wage. Union workers. Mostly government workers unions these days. And minimum wage not killing jobs? Please explain why with transportation costs and time delays and language barriers it was once cheaper to move jobs to Japan? Well you may not remember that era. But certainly you have heard of China.

      And what is bringing jobs back to America? Cheap robots. Those low end jobs are gone forever. Unless you work for government.

      Like

    • M Simon,

      “And do you know who minimum wage raises really benefit? Workers whose contracts are tied to the minimum wage. Union workers. Mostly government workers unions these days.”

      Fantasy is so much fun! It always re-enforces your beliefs. Unfortunately there is a large body of research showing that this is false.

      Like

  • And Warren Buffet? How does he win? Well he owns a railroad. The railroad transports oil from Canada. A pipeline would do it cheaper. So what does he do? Bankrolls an anti-pipeline faction. You might want to look up the Canadian town wiped out by one of his trains crashing. And that is not the only one of his trains that have crashed.

    What Warren does is called regulatory capture. He DEPENDS on government. The only way to beat him is to shrink government.

    Like

  • Why are wages stagnating? Because we can replace people with machines. In the end we will be wealthier. Just as we became wealthier when machines replaced farm labor. But the transition was wrenching. This one will be no different. How can it? Eventually people will find work that machines can not do.

    The only way you can turn people into slaves is at the point of a gun. A government gun.

    Like

    • Simon,

      (1). “Why are wages stagnating? Because we can replace people with machines.”

      OK, now we know you are just making stuff up. This trend goes back decades, stretches across much of the US economy, and has deeper causes than just technology.

      (2). “The only way you can turn people into slaves is at the point of a gun. A government gun.”

      False. We had actual slaves in America, and it was a free-market process. Ended by government action.

      (3). “Eventually people will find work that machines can not do.”

      You should end these insanely confident statements about the future with “amen”. The future might not be like the past as tech advances.

      (4). For more fact-based discussion of automation see these posts.

      Like

  • About M Simon’s comments

    Simon has made scores of comments on the FM website since April 2008. Many are quite brilliant and well-informed. But here we see his weaknesses on full display: unamerican values, lack of grounding in facts, over-confident forecasts.

    (1) Values

    Note that Simon doesn’t even attempt to dispute the primary point of the post — about rising inequality and the resulting new class structure. Although falling social mobility and rising inequality are quite unAmerican — to most of us — Simon is cool with these things. He’s an apologist for them.

    Perhaps he would be happier in an oligarchic state, where people are born to their station in life.

    (2) Facts

    Five years ago, on 8 October 2008, I wrote this about M Simon’s comments, and today we see this remains true today:

    “Since M. Simon almost never cites sources for his often outrageous assertions, I often wonder if he’s just playing with us. Perhaps acting as the FM site’s unofficial jester!”

    (3) Over-confident forecasts

    I’d love to see a “smackdowns” page for M Simon’s postings (like mine here). He might learn much from it. Let’s look at some of his confident statements.

    (a) Speaking in August 2008 about the coming blockade of Iran, as if he had certain knowledge of it. Never happened.

    (b) A few statements from August 2008:

    “Bush won 2 elections. McCain will win the next.”

    About the US economy, written one month before the worst collapse since the Great Depression: “The worst is behind us. … And what did the worst do to us? Slowed growth to .5% in one quarter. Boo frickin hoo.”

    Part of his forecast for cornucopian rise in cheap oil production: “The Canadians are producing at around $15 to $20 a bbl. “

    Like

    • More about M Simon’s un-American values and indifference to facts.

      (1) Values

      “The TEAs are trying to keep government from collapsing so they can get back some of the money government stole from them.”

      Taxes are a legitimate excise of government power, and have been considered such for millenia. Under the constitution, they are legitimate when approved by elected officials in the proper form.

      Here Simon asserts that this process is illegitimate, and the these taxes are stolen from people. This is the clearest anti-democratic statement I have read in years. He doesn’t statement what system he would prefer to the Constitution.

      (2) Facts

      (a) “The only way you can turn people into slaves is at the point of a gun. A government gun.”

      False. We had actual slaves in America, and it was a free-market process. Ended by government action.

      (b) “SEIU is just another criminal organization. They have figured out how to use government guns as a means of extraction.”

      The Service Employees International Union (Wikipedia) is a labor union representing about 1.9 million workers in over 100 occupations in the United States, and Canada.

      (c) “Democrats practice crony capitalism – what used to be called fascism in a different age.”

      Fascism is a political ideology with specific characteristics, not some slur you can throw at your foes.

      (d) “I don’t know if you remember the dot com bubble. For a couple of years the economy was growing at around 7% or 8% a year.”

      Annual change in US real GDP, per the Bureau of Economic Analysis:

      1. 1996: 3.8%
      2. 1997: 4.5%
      3. 1998: 4.4%
      4. 1999: 4.8%
      5. 2000: 4.1%
      6. 2001: 1.0%

      Like

  • It’s wonderful that we have characters like M. Simon showing up here to give vivid life-size illustration of the hubris, ignorance, folly, mindless ideology and counterfactual jingoism that FM has long been disagnosing as the basic problems with America.

    Thanks, M. Simon, for providing living proof of FM’s assertions.

    Like

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