Archives for category: Economics

Last week I saw one of those blocks of text posted on Facebook in an image file. I probably know better than to share these things without looking up who the attribution belongs to, but no one who read it called me out on the person who said this:

Treated like starved rats in cages, human beings will interact accordingly. If everyone had jobs, healthcare, education, and safe, affordable housing, relations between humans would be transformed: With nothing to police, there would be no need for police. But with scarcity comes the need to enforce the unequal distribution of resources. The absurd contradiction we must resolve is that capitalist scarcity is artificial. There is more than enough to go around. It is only the profit motive that stands in the way of a rational system of production, distribution, and exchange in harmony with the environment.

(Attributed to a John Peterson – none of the John Petersons or John Petersens on Wikipedia’s disambiguation pages seem to be the type to utter this sort of sentiment. However, a search reveals the quote comes from a July, 2016 editorial published on marxist.com and possibly also in The Socialist Appeal. USA: Police Brutality, Racism, and the Politics of Polarization.)

Two people commented on the post. One offered a pretty flippant restating of the communist declaration (‘to each according to ability, from each according to need’) as ‘To each according to their ability to fake their need, from each according to their ability to hide their skills.’

Francine Orr / Los Angeles Times

There’s no arguing the Marxist perspective of the original quote, but boiling it down to the failure of Communism to produce a just society is missing the point. The second commenter wrote something longer than most of my blog entries in which he described the key failures of communism in Czechoslovakia/the Czech Republic (a place he lived for 20 years and I lived for five). The issues he brought up revolved around the tenet ‘He who does not steal from the state steals from his family’ and the soul-destroying pervasiveness of the state apparatus.

Both of these comments, however, miss the point Peterson is trying to make: We have too much money, food, and housing to deny a roof and a meal to anyone. The scarcity under which we operate is a construct we use to keep a large segment of the population in straits. I can’t explain our defense of the status quo any more than I can explain why we continue to teach children that it’s acceptable to bully the kid being raised by an interracial or same sex couple. Insert comment here about Americans all being frustrated millionaires rather than one medium-sized tragedy or difficulty from being on the street.

The trick, of course, is extricating ourselves. Politically speaking, it’s a nonstarter, at least in the UK and the US. But have you walked over the homeless in any major city? What I keep trying to say here, in as many different ways as I can is that it doesn’t matter how a person gets into straits, or finds herself unable to feed her family or ends up estranged from the network of people who raised him. The social contract we’re in as members of human society should be the one in which a person on the street gets a meal, a roof, care.

I have found myself and others concerned with the difference between what that poor person gets and what we have. And what we’ve earned that they haven’t. Politics always plays into this craziness and the flip side of housing the family on the street is looking at extreme wealth. I do begrudge the very wealthy their fortunes for a variety of reasons, the main one being that there are hungry people on our streets. Another is that the extremely wealthy find it easier to maintain power structures that enable the hoarding of wealth. And then there’s the way extreme wealth seems to multiply for some at about same rate as extreme poverty multiplies for the rest of society. Earlier I was looking at the Wikipedia article on presidential candidate Michael Bloomberg. In passing, the article notes that in 2009, Bloomberg’s wealth was approximately 16 billion dollars. Think of how many people you know that have even 16 thousand dollars available to them. At the time, Bloomberg was worth one million times that sum. One question is, how has he nearly quadrupled that fortune in ten years? I think we can look at most members of the two houses of the US Congress and find similar expansions of fortune, in terms of rate, if not scale.

And I ask: Leaving 10 billion dollars in his pockets, how many people can you feed, clothe, and house for 50 billion dollars? Flip it around. If you could levy a one-time tax on wealth of that magnitude of even 10%, how many people could Bloomberg feed for six billion dollars? When we talk about how to feed people in the US, we have to look at the people in those strata because the wealth keeps getting sucked up and none of it trickles down, notwithstanding the lies of Ronald Reagan all the economists he and his successors parroted.

At what point does the hoard just become accumulation for the sake of accumulation? We know that shame plays no role in this. If it did, we wouldn’t have people working multiple jobs just to keep one step or half a step ahead of winding up in a tent city under a freeway. When does the fact that San Francisco, New York, and Manchester, London, Vancouver and Rio de Janeiro having large sectors that look like something out of the Grapes of Wrath reveal to us the poverty of our responses?

And how large do we have to think for this situation to become largely unacceptable? We’ve been accepting it so long, that it seems normal.

We’ve painted ourselves into a corner with the outbreak of Covid-19 (aka Coronavirus). How much manufacturing previously done in the West is now (not being) done in China and other countries in Asia? We made a decision in the 80s that American manufacturing was too expensive and that we’d do better as industrialists and consumers to move production to Mexico and Asia. This, I suppose, is fine, save that we stopped paying living wages to America’s (former) manufacturing employees and increased their credit lines as a sort of compensation.
That’s three of several dozen problems that have been building up in the US over the last 35 years or so. How we handled American purchasing power is a different part of the discussion. China raised its own game in the years following the pro-democracy demonstrations in 1989. You can’t have democracy but if you’re a Chinese citizen you are entitled to some more of these trappings of capitalism. And it seemed to work. Many Chinese got filthy rich, casinos opened on Chinese real estate, for example, and if you weren’t used to democracy, it did work. Hong Kong? Different question. (Fairport Convention’s Jewel in the Crown seems appropriate.)
Anyhow, US and to a lesser extent, I think, European purchasing power went up, because a lot of Chinese made a lot of stuff very cheaply. So it didn’t matter that real wages in the US haven’t shifted much in 40 years. The decline of unions in post-Reagan America pushed workers into so-called service industries where real wages are kept artificially low much of the time.
Bottom line: We don’t MAKE anything, and as a result we’re in a position where the place that does make all our stuff is on lockdown for we don’t know how long. And creating a manufacturing sector out of whole cloth can’t be done so easily anymore. (It could be done if we were willing to pry a little bit of money and commitment out of the 1%. Not in the cards at the moment.) The same is true in Europe. We have the tools to create that self-sufficient situation, but it means retraining the populous to buy what they need and a lot less of what they want. We’re going to learn mighty soon that the old watch, phone, and TV will last a little longer. (A little less of the planned obsolescence would go a long way.) Clothes and everything else we buy might be more expensive, but part of what we need to do to recover, sustainably, from this crisis is to rebuild the industry and rework how we as people and consumers and industrialists relate to industry.
In William Gibson’s novel The Peripheral, we meet a class of people, the klept, who have more money than they could ever use and play games with large swaths of humanity, often to the death. Gibson didn’t have to reach far for models; examples of the kleptocracy are all around us. The damage they do is not quite at the scale of Gibson’s klept only because Gibson imagines hundreds or thousands of timelines they can use for their playgrounds. (The chapter entitled Parliament of Birds (pdf) gives a good idea of what the klept are about.)
I’ve been considering writing about our modern klept for several weeks now and just when I think there’s nothing worse that could happen, I only have to consider the headlines for a moment. The most public members of the Klept, or maybe just their public representatives, are (not surprisingly) Boris Johnson, Donald Trump, Vladimir Putin, and (new member!) Brazil’s Jair Bolsonaro. When I thought I might be able to let this idea go, go on to writing something else, I saw this BBC headline: US and Brazil agree to Amazon development.
The world is quite literally on fire from Alaska to Siberia to Australia to, indeed, the Amazon. Instead of finding ways to protect these places for future generations, these so-called leaders are letting them burn so that the land can be exploited for oil and agribusiness. Bolsonaro’s very clever – if he doesn’t do anything about the fires, he solves one issue that he’s publicly declared a problem: the native populations of the Amazon basin. If they no longer have a forest in which to live, they’re no longer in need of any kind of protection. The other advantage I’ve read about is that he can then allow monoculture farming of in-demand commodities such as soybeans. (This becomes attractive given how Trump has buggered up the Chinese market for American soybeans. Trump’s trade war with China is one that probably could use some delving but it makes little sense to me as yet.)
And if neighboring Venezuela is anything to go by, there’s probably oil to be drilled as well. (Note that the vast majority of Brazil’s untapped oil holding is found in a region off the coast of Rio de Janeiro, rather far from Venezuela.

Man looking right forking dollars into his mouth while much smaller man has pennies to eat. Caption: When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it. Frederic Bastiat, French economist.

I know that equating fat and eating with greed is problematic, but we’re dealing with the oversized share of wealth consumed by the few at the expense of the many. I think this illustration addresses that pretty well.

And if we let Alaska burn, it may be easier for the oil companies to get into ANWAR (Arctic National Wildlife Refuge – a protected area that contains some desirable oil reserves). At the moment there are fires throughout central Alaska, but not in the northeast corner where ANWAR is located. Difficult to access Siberian reserves are also going to be easier to get at once the place burns. (Yes, I’m being terribly reductive. The fact that these fires are starting because of record high temperatures caused is not lost on anyone concerned, though.)
This isn’t exactly the klept in a nutshell. But the high-stakes games being played with the lives of large numbers of inconveniently located people form the heart of what the ultra-rich and the world leaders who front for them are about (and have always been about).
The thing with Johnson and the mess that Parliament is trying to clean up is that Johnson’s a really minor member of the klept. Cursory web searches suggest that his net worth is about two million pounds. More than I’ll ever see in a personal bank account (unless things go really tits up, Zimbabwe style), but in the grand scheme of the very wealthy, not very much. So why is he pushing for no-deal Brexit so hard? The short answer is that the klept in the UK stand to lose a lot of money when the new EU Anti-Tax Avoidance Directive goes into effect next year. Pretty much all of the large-scale folks who have pushed Brexit stand to lose a lot of money. Johnson, it seems, is mostly just a front for those folks.
There’s more to address regarding the American klept, including folks like Mitch McConnell, but it’s going to have to wait.

Last week, my partner and I went to the movies in Telford. Having booked tickets for about £34 on nearly a whim and driven 40 minutes on a wet night to get to the theatre, I can suggest that we're not hurting. The same cannot be said for a woman we passed between the parking lot and the entrance to the multiplex. She was underdressed for the weather, was missing a front tooth, and sat under an umbrella with a cup. She told us she was trying to raise £18 to get a bed for the night. We could have covered that amount without thinking twice. Partner gave her two or three pounds as she had change which I did not. I bought her a sandwich and a cup of coffee from the Starbucks inside, because I could feel good about buying her some sustenance.
There's a subconscious mental juggling act in which I think I'm supposing she should work harder to get a roof over her head for one December night rather than just having it.
I've equivocated that sentence because I'm afraid of articulating just what goes on in my head when I give a homeless person less than what they need to get to the next step. The personal calculus is that as an individual, I don't have the ability to adopt every person on the street. And I extend that to 'or even one person on the street'. And in the family that consists of my partner and me, the calculus is that we don't want children of our own or even to adopt or foster. There's a selfishness to it, to be certain. And an unwillingness to examine just what it would take to abandon our plans to pay off our house and have the retirement plan that we want. We both know how very lucky/blessed we are to live the way we do, but not to the extent that we extend that luck too far from ourselves.
I vote and I donate to campaigns of politicians who seem to think the way I do about how the future should look, but in the end, they're politicians and they vote in favour of much larger sums of money than I represent. And in the US and the UK the ones who profess support for the underclasses are in the minority. Again. (Note: When the left holds the majority, they're only slightly less mendacious. I'm not blind in this regard.)
My job is still fish. (And your job as well, I trust.) The problem is still how to get fish to people. I give irregularly to charities that seem to be doing this work and every year I say to myself that I'll make this more regular. Every December a local food bank does a drive at my local supermarket for one day – my guess is that they go for one day to each of the big supermarkets – and on that day I buy 30 or 40 euros worth of stuff off of the bank's want list. While that's definitely regular, it's not enough. (Note: I'm in England at the moment and spending pounds, I grew up in the US, and I live in the Netherlands.)
In between, I send some money to this charity or that charity as the whim hits me and pledge each January to make it a more regular. So I write down some random thoughts on the matte and make a note to make a note to do something about it. As soon as I finish writing this, I'll create a calendar entry that will repeat on the first of each month to give some group or other some money or fulfil something on that group's amazon wish list. (One group I support sometimes is London's Breakfast In A Bag who have an ongoing list of things they provide to those sleeping rough.) As noted, this kind of thing is really easy. There's much harder work to do and I don't have the slightest where to begin.
I visited Oakland, California where my sister and her family live (and where I lived about twenty years ago) and the homelessness has gone off the charts. People who have spent decades in public service probably have some ideas about the solutions needed, but as noted above, there is no political will to help people who don't vote with deep pocketbooks. These are the folks with no pocketbooks at all left.
Our jobs are not judgement. The jobs are fish. Some of us have fewer fish than others, but I have a feeling that everyone reading this has more fish than they need. Give more fish.

The DecodeDC podcast aired a discussion (episode 67) with English economist Richard Reeves of the Brookings Institution who talks about ways to measure the (in)equality of opportunity in America. His study divides the population into slices of 20% each – families who are in the top 20% of earners (about $150,000/year for a family of four) are 1s, the next 20% are 2s and so forth. The research found that if you’re a 1, your children will also be 1s and if you’re a 5, your children will remain in that state as well. Not too counter-intuitive, these days. He then brings up the obvious point that  there are several gaps: Marriage, Education, Neighourhood, and Race, like so:

  • Children raised by  two parents are more likely to move up than children raised by one.
  • Children raised by parents who earn degrees are more likely to move up.
  • Children raised in poor neighbourhoods are more likely to stay in them
  • Non-white children are more likely to remain in their quintiles or slip into lower ones than white children.

What I missed from the podcast clip (but is well-covered in Reeves’ own reporting below) was how these numbers have changed over the last hundred years.

income_inequalityMy guess was that 100 years ago, the numbers were a little better than they are now – mobility of immigrant populations especially was based a lot on making it by the sweat of their labours. However, poor blacks were more likely to remain poor blacks. There was probably a little more mobility in the post-WW1 boom time for non-blacks, but this was probably exaggerated, much as the mobility of the late 90s mini-boom was.

The period I’m most interested in is from 1945-1990, during which time there was a great deal more mobility and a much smaller gap between the richest and the poorest. The gap started to expand again during the Reagan years, but I think the real damage of his policies came after he left office. There were inklings in the Clinton years that things were going to go horribly wrong in the inequality department, but they only hit high gear in the Bush Jr. years.

Reeves goes into much greater detail regarding the history in his essay Horatio Alger: Equality, Opportunity, and the American Dream: ‘In the first half of the 20th century, after the closing of the frontier, the rapid growth of the nation slowed, with the result that both income and wealth gaps widened to European proportions, and the engines of upward mobility stalled.’

Post-WW2, the combination of social mobility programmes like the GI bill, and relatively high rates of taxation at the top of the scale meant that there was a bit more mobility, but that the wealth gap was much smaller.

As noted, the inequality trends returned with the Reagan years, but their trajectory was stunted somewhat by the stronger economy of the Clinton years. Bush Jr.’s tax cuts and financial deregulation (begun in the 90s – some of the fault does go back to Clinton) did in what was left of general upward mobility.

So those are some of the big political issues that affect the gap, but every day we see things that are built to make it bigger. Easy credit is one – possibly non-existent 100 years ago, but everywhere in the US today. (My ex worked in secure card customer service back in the 90s – people who had no business with plastic in their wallets were bankrupting themselves. There has been no effective tightening of those rules in the intervening 20 years either.)

Another one is health insurance. While Obama’s done astounding work making the cost of insurance lower and easier to bear for many, health insurance firms have always been for-profit ventures and this has exploded in the last 25 years or so. A business that raises rates even 10% year on year and predicates itself on denying the service it purports to be selling is not health, but is likely to be very profitable if the service it sells is required. Even if you pay into the system, in states that haven’t implemented ACA, one good accident can bankrupt you. (Combine that with the ever-relaxing rules on gun ownership and the goose that lays the golden eggs just got a dose of fertility drugs.)

Note that big medicine has fought single-payer health in the US for over 100 years. Didn’t think the argument went back that far? Franklin Pierce vetoed a bill calling for federally funded asylums for the blind, deaf, and insane in 1854. Both Theodore and Franklin Roosevelt supported plans for state-funded or federally funded health schemes which the American Medical Association opposed. The AMA and the insurance industry opposed Medicare and Medicaid, but President Johnson managed too push those through in the 60s. And all attempts to expand on those propositions has been vehemently opposed ever since. Even the summaries in Wikipedia of this fight churn the stomach.

The Tories have been taking these ideas and running with them. How to get more money out of the pockets of the middle classes in return for next to nothing? Privatise national health. For decades, everyone has paid into the NHS and for the last decade or so the NHS has been shrinking its services. My in-laws live in an area of scattered small villages. There used to be a good hospital relatively nearby. Shut. Should there be an emergency in any of half a dozen villages, and possibly more, it’s at least an hour to the nearest major hospital.

Have their taxes gone down? No. And even if they had, the whole point of health insurance (at the national or private level) is that of collective risk. And bearing a collective burden for the greater good. Sort of like vaccination, but that’s another discussion.

I’ve probably discussed tuition fees before – Ronald Reagan instituted tuition payments on the public college/university system in California back in the 60s. These were still low when I enrolled at San Francisco State University in 1985. $300/term for the first year. When I left in 1989, my final semester cost $1300. It’s now about $6300 per term. In the UK, all of the universities were free until Cameron found another way to reward the bankers. My wife’s degree from Cambridge had no tuition. She had to be brilliant enough to get in, but family wealth wasn’t a consideration. Now? £9000/term. Add interest to those student loans, and it’s a windfall.

So, yeah, the movement of wealth from the bottom rungs to the top is, among other things, about college, credit, and coronary risk. It’s also about the ownership of legislatures and electoral processes by moneyed interests (whose wealth isn’t decreasing).