Tag Archives: income inequality

Warning: the income gap between races is widening in America

Summary: We begin the Trump years with generations of progress unraveling in the healing of America’s racial divide, with the likelihood of further deterioration quite high. We should understand what’s happening to better prepare for what’s next. A new study looks at the causes of the widening income gap between black and white Americans. It makes for enlightening but depressing reading.

"Nevermore" says the Raven.

Divergent Paths:
Structural Change, Economic Rank, and the Evolution of Black-White Earnings Differences, 1940-2014

By Patrick Bayer and Kerwin Kofi Charles.
National Bureau of Economic Research (NBER), November 2016.

“The economic fortunes of black Americans relative to those of whites have improved greatly since the end of the Civil War, but convergence has been both glacial and imperfect. Substantial racial differences in wealth, income, and numerous other economic markers remain and there are signs that the closing of some of these gaps has significantly slowed or even reversed in recent decades. In this paper, we study the evolution of black-white earnings differences among prime-aged men from 1940 through the Great Recession.”

Their findings are disturbing. Many Americans considered the progress of black Americans since WWII, and especially since the 1960’s Civil Rights bills to be among our finest accomplishments — belated recovery from the eras of slavery and Jim Crow. This adds to the research showing that progress has stalled. More specifically, the racial income gap for upper income black Americans has narrowed while the gap for those in lower income brackets has widened.

The reasons for this have been obscure. The racial gap in educational attainment and school quality have narrowed since WWII. Why have black men in the middle and lower income groups done so poorly? Their analysis concludes that the gains went to black men that managed to gain the education credentials that our society uses as the gateway to prosperity.

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Why doomster stories are so popular: we want to believe America is doomed

Summary: Yesterday’s post examined widely believed reasons that America will fall, and debunked them. This post discusses why such doomster narratives have become so popular and widely believed. The answer explains much about Campaign 2016.

Independence Day at the White House

This is follow-up to follow-up to The big list of reasons why America will fall (with rebuttals). It examined “The US Position is Untenable” by Karsten Riise, an unusually comprehensive doomster rant. The rising US public debt will crush the US dollar! The US is not competitive! The US has a weak education system! The US middle class is dying! We can’t raise taxes on the rich! America’s poor at risk of starvation; they just need more education! America’s military grows weaker! The US economy is unsustainable!

A few of these are partially correct. Most are exaggerated, or describe global problems (hence not a cause of relative decline). Some are outright wrong. But all of these are popular complaints, as it the overall doomster narrative.

Yesterday’s post discussed the objective accuracy of these claims. Today’s looks at their subjective truth, asking why these — and the overall doomster narrative of national decline — are so popular. The answer explains the unexpected strength of the Trump and Sanders insurgencies (see their overlapping views).

The first subjective truth: life at home

Many Americans feel the national doomster narrative is true because they see it in their own communities and in their own lives. America is filled with ruined communities and families with broken hopes, despite the nation’s fantastic growth in wealth since 1971.

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The 1% won a counter-revolution while we played

Summary: Campaign 2016 has taught us invaluable lessons, as we choose between a clown and a Clinton — a servant of the 1% (sponsored by Goldman). It’s a fitting marker for their victory. But we do not yet see the hidden struggle that brought the 1% back to power, and cannot yet see how to reform America. Others will control our future until we see these things. Here’s a cut at that. This is a revision of a post from April 2014.


Somewhere in our future lies the Third Republic


(1)  A different perspective on America

During the long halcyon days of the post-WW2 summer America forgot about economic and social classes — and their cousin, social mobility. A confluence of circumstances made a new America: the cessation of immigration by the 1930’s, the New Deal’s reforms to America’s political and economic structures, the post-WW2 social programs (especially the 1944 GI bill and the Cold War-boosted funding to education (from primary to graduate-level), the 1960’s civil rights legislation — plus the sustained growth of GDP and wages. All these created the rise of a middle class and provided a modest degree of social mobility.

We came to consider this wonderful new America (so different from the horror show of 19th century America) as the true America — not what it actually was, a hard-won victory after generations of oligarchy. We considered this to be our just due.

This summertime culminated in the long boom — the debt-fueled almost recession-free expansion of 1982 – 2007, supercharged by the fall of the Berlin Wall in 1989 and the late 1990’s tech boom. America was exceptional, history’s favored son, a new moment in history. Marx became a comic figure. “The only Marxists live in Berkeley and Albania.”

The Boomers inherited the New Deal coalition. But most of their political activism was to benefit themselves — such as ending the draft, opening the work world to women, and gaining rights for gays (issues about which the 1%, as a class, are uninterested).

We forgot the long slow low-violence revolution that began after the Civil War, laying the foundation on which the middle class rose. We forgot that we are the crew on the USS America, not passengers on the Love Boat. Too few of us bothered with the boring work of working the engine room and steering the ship.

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An anthropologist looks at America’s growing proletariat

Summary: Here anthropologist Maximilian Forte looks at America’s changing social structure (the rise of the 1%, death of the middle class) using perspectives from Rome, Marx, and modern identity politics. It’s one of his best essays, worthwhile reading about America’s most serious problem (fracturing our social cohesion, making solutions of the others difficult or impossible).  This is the material that should shape Campaign 2016.



The Ultimate Proletarian and
the Neoliberal Condition

By anthropologist Maximilian C. Forte.
From Zero Anthropology
Reposted with his generous permission


Middle class to proletariat

The word “Proletarian” has acquired many layers of meaning over the centuries, possibly in part because the many, historically changing situations of proletarians became more complex. Since the advent of western European capitalism in the 16th century, proletarians were defined as “members of the lowest class”. By the mid-1800s, they were “the lowest class” composed of “indigent wage-earners”.

For Marxists, proletarians were defined by their relationship to production — they rented out their labour in exchange for a wage, with wages kept lower than the market value of what they produced, and were separated from what they produced since they produced for exchange, and not for their own use. Lenin’s vision of the future involved a dictatorship of the proletariat, in the socialist phase toward communism.However, as anthropologists have argued, there have been many different degrees of autonomous access to resources among rural proletariats worldwide, simultaneously involved in both production for use (subsistence) and for exchange (cash crops). Some advanced the term “polybian” to describe people with multiple sources of income, besides that earned from wage labour.

Finally, Immanuel Wallerstein cautioned that the ultimate aim of capitalism was not the full proletarianization of workers — that is, reduced to a total dependency on wage labour to sustain themselves, because that would ultimately make capitalists responsible for the welfare and reproduction of the workforce. That is hardly the first priority of those committed to the ceaseless accumulation of capital. The ideal is maximum profit, which means wages held as low as possible. One can depress wages when it is known that workers have other sources of sustenance, where either they have their own plots of land where they can grow their own food and/or participate in the so-called informal economy as hucksters.

But when proletarians have no alternate avenues, then the need for “a job” and for wages, is at an absolute maximum. One of the fatal flaws of neoliberalism is that it has reduced a great many of us to exactly this state of total dependency on capitalists, at the same time as they have shirked all social responsibility (minor philanthropic palliatives aside).

Editor’s note: One of the great innovations of the post-WWII is corporations’ pushing wages below sustenance levels, forcing employees onto food stamps and Medicaid.

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Taxes: one of the bright lines distinguishing Trump from Clinton

Contrary to the “there’s no difference between the two parties” nonsense, the core of GOP tax policy since the 1970s has been tax cuts for the rich — paid for by cutting benefits for everybody else and increasing deficits. Despite Trump’s faux-populist rhetoric, his tax proposal is right-wing orthodoxy. Now he seeks to dress this up for the general election, consulting far-right spin-masters (Paul Krugman aptly sending in the clowns).

Do not be deceived. Tax policy is a fault line distinguishing the two parties, having a large (albeit slow) effect on the evolution of American society. From the US Tax Center (no relation to the IRS), it gives a clear comparison of the Clinton and Trump tax plans (as they are now; they’ll change).

Comparing the Candidates Tax Plans

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See America’s income inequality grow during 1979-2011, a driver of Campaign 2016

Summary: To understand this election we must see the accumulated stresses which produced the insurgencies in both parties. Rising income inequality — “the hollowing out” of the middle class and rise of the 1% — is probably the biggest, yet still poorly understood (until recently conservatives denied it). This great study by one of our top economists describes the dismal picture, essential for us to understand if we are to begin the reform of America.

Income growth by quintile — and by percentile for the top quintile

Income Growth 1979 - 2011

Growth of income and welfare in the U.S, 1979-2011

By John Komlos. Published by the NBER, April 2016
Excerpts. Red emphasis added.


{These} estimates have to be considered preliminary. Nonetheless, there are a few consistent patterns in which we have confidence that they will survive successive improvements.

These include most vividly what in the colloquial is referred to as the “hollowing out” of the middle class. The lower-middle class 2nd quintile and the middle class 3rd quintile fared the worst in all specifications: their income increased at a rate of between 0.1% and 0.7% per annum (Figure 1). In contrast, the only group whose income grew remarkably was the 5th quintile and especially the top 1% whose income registered an astonishing growth rate of between 3.4% and 3.9% per annum, reaching an average value of $918,000 by the end of the period under consideration.

Somewhat surprising is the consistently positive growth of the income of the lowest quintile. The poorest group registered an income growth estimated to be between 0.5% and 1%, i.e., consistently above that of the 2nd and 3rd quintiles, and equaling that of the 4th quintile (Figure 1). This is all the more surprising insofar as their net transfers decreased over time while those of the three middle class quintiles increased by as much as $9,000 per annum (Table 4).

… However, it is astounding that the relative income of the rest of the 5th quintile besides the top 1% did not experience such humongous growth. Only the top 1% increased enormously from a factor of 21 to a factor of 51, a surge of no less than 144%.

… Another recurring pattern is that the income of the 2nd and 3rd quintiles consistently lagged behind the other quintiles. This is referred to in conventional parlance as the “hollowing out of the middle class”. … According to the low estimates, it would take about 600 years for incomes in the 2nd quintile to double and on the order of a millennium for welfare to double. These are growth rates that are reminiscent of those that prevailed prior to the Industrial Revolution.

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A guaranteed minimum income: faux solution for the new industrial revolution

Summary: Solutions are proposed as the shockwave of the new industrial revolution becomes visible on the horizon. Naturally, we first get small and comfortable ones — such as a guaranteed minimum income, which guarantee high and growing levels of inequality. We might even implement these, leaving the resulting social turmoil for the next generation. First of 2 posts about the GMI.

Our future if we distribute technology’s gains via welfare.
Well-fed, well-dressed menials bow before the aristocrats.

Servants Bowing to their betters

Photo by ullstein bild via Getty Images.

First, the new industrial revolution was debunked. When it become too obvious to ignore, the coming destruction of jobs was denied. Now that too has become obvious — so attention turns to easy solutions. Most commonly recommended is a guaranteed minimum income — a greatly expanded welfare system. For example…

Productivity has risen, but the gains went to profits (not workers ), then flowed through to the top few percent of households, leaving little for the rest.

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