Tag Archives: wealth inequality

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.

Phoenix

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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Our future will be Jupiter Ascending, unless we make it Star Trek

Summary: Will our future be like Star Trek or Jupiter Ascending? Star Trek shows us a world beyond scarcity where everybody benefits. In Jupiter Ascending the 1% takes the wealth produced by technology and uses it to rule us. We can choose to make Star Trek our future if we are willing to work for it, but now we’re condemning our children to live in Jupiter Ascending.  {First of two posts today.}

Jupiter Ascending

“No, I don’t share my wealth. Why do you ask?” From Jupiter Ascending.

Consider the increase in the West’s wealth since 1750 and the advancement in technology. Imagine similar progress for another 250 years, to the time of the original Star Trek TV series. Rick Webb describes that world in “The Economics of Star Trek: The Proto-Post Scarcity Economy“, a market economy whose productivity allows the government to easily provide a high basic income allowance to everybody.

The amount of welfare benefits available to all citizens is in excess of the needs of the citizens. … Citizens have no financial need to work, as their benefits are more than enough to provide a comfortable life, and there is, clearly, universal health care and education. The Federation has clearly taken the plunge to the other side of people’s fears about European socialist capitalism: yes, some people might not work. So What? Good for them. We think most still will.

Discussions about Star Trek often focus on what we do with the abundance of goods and services produced by their fantastic tech. It’s fun, like composing fantasy football teams or designing the ideal Prime Directive.

In our world the 1% shows us an alternative to Star Trek. The largest fraction of America’s increased income since 1970 has gone to the 1% — and even more to the .1%.  They could share the booty (nobody can consume a billion dollars in a lifetime), but prefer instead to amass wealth and power. Why would this change with the invention of robots and replicators? Continue current trends for a few centuries and you reach Jupiter Ascending — a world of servants and lords, where the rich own planets, live almost forever, and harvest the peons. A world like that of our past, as seen in Pride and Prejudice.

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When marriage disappears: rising inequality as the threat to the family

Summary:  This post looks at the disintegration of the family, another example of America’s regression as we quietly surrendering generations of gains. The America we loved — relatively classless, with a big middle class, low inequality and high social mobility — dies a little every day. The evidence lies before us, obvious in the news and described by countless studies. But to see it would create pressure to take political action. Work, risk, expense! It’s not too late to reverse these trends, but time is not on our side.

When Marriage Disappears

When Marriage Disappears: The Retreat from Marriage in Middle America
The National Marriage Project, U of VA

Introduction

In middle America, marriage is in trouble. Among the affluent, marriage is stable and may even be getting stronger. Among the poor, marriage continues to be fragile and weak. But the most consequential marriage trend of our time concerns the broad center of our society, where marriage, that iconic middle-class institution, is foundering.

For the last few decades, the retreat from marriage has been regarded largely as a problem afflicting the poor. But today, it is spreading into the solid middle of the middle class. …

Race, Class, and Marriage

Forty-five years ago, Daniel Patrick Moynihan drew the nation’s attention to the growing racial divide in American family life with the release of his report, “The Negro Family: The Case for National Action.” Moynihan later noted that his report had just captured the first tremors of “the earthquake that shuddered through the American family” over the course of the last half century.

Moynihan was right. This can be seen in Figure S1, which tracks trends in the percentage of working-age adults (25–60) who are in intact marriages, by race and educational attainment. While it is true that the nation’s retreat from marriage started first among African Americans, it is also evident that the retreat from marriage has now clearly moved into the precincts of black and white Middle America.

Specifically, in both the 1970s and the 2000s, blacks in all educational groupings were less likely to be in intact marriage than were their white peers. For both groups, marriage trends were not clearly and consistently stratified by education in the 1970s. However, by the 2000s, they are clearly stratified, such that the most-educated whites and blacks are also the most likely to be in intact marriages, and the least-educated whites and blacks are also the least likely to be in intact marriages.

This report is too rich in insights to summarize. The message and graphs are clear; it’s easy to read. I strongly recommend reading it. Here’s one graph I found especially compelling.

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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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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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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.

Sunshine

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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