Archives for category: Economics
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).

 

In a New Yorker book review (16 Feb, 2015), Nathan Heller describes the places of several nordic countries on various happiness indices. He offers some reasons why these peoples measure their own happiness so positively (good schools, free tuition, effectively free health care, an unfrayed safety net, before offering the opinion of Michael Booth, author of The Almost Nearly Perfect People, that the services one receives in exchange for an upper tax rate of over 70% are ‘patchy’.

Heller delves deeper into Booth’s arguments, pointing to alcohol consumption, employment rates, bureaucracy, and cuisine, and ultimately shreds both Booth’s approach (let an expert speak at length, then quote without fact-checking and present everything in a quasi-Innocents Abroad ‘aren’t these foreigners quaint’ fashion) and his conclusions. Finally he moves from discussing Booth’s take on Scandinavia to an assessment of the current changes to the social order in many of these countries as a result of immigration and rising inequality.

While it’s a shame that the welfare state aspect of many such countries is being undercut by US-style “free-market” “improvements” (see the privatisation of the rail system and tuition requirements at formerly free higher education facilities in the UK, for example, not to mention the pillage of the NHS that not even Maggie Thatcher would have dreamed of), these things are not trivial. I’m not the first to suggest that I don’t mind my taxes paying for education even though I don’t have children: I don’t want to live in a society surrounded by the uninformed. The review describes a Swedish couple, the wife of which didn’t pay any tuition to become a neurosurgeon. Fantastic. I’d rather any doctor I see to have gone through medical school on merit and without the worry of how to pay back hundreds of thousands of dollars/euros/etc. in student loans.

The introduction of tuition to previously taxpayer-funded universities is a tradition pioneered by Ronald Reagan when he was governor of California and, as noted, now followed by Cameron and his cronies in the UK. Like the privatisation of the rails and the NHS, it is nothing but a transfer of wealth from the lower and working classes to the bankers and other members of the 1%. Calling it anything but a handover to the City of London is to miss the point.

Rachel Maddow this week told of how Wisconsin’s Governor Walker is on a quest to slash funding for his state’s renowned public university system by hundreds of millions of dollars. Same thing. Please the bankers, and your next campaign is funded.

At the same time, Germany is offering free tuition to its universities to anyone who can pass the entrance exams. My sister told me of a couple she knows with two kids, eight and ten, if I recall rightly, who are moving there, though this new plan does not require German residency or citizenship. Language, yes, but if you can get in, Berlin will pay your tuition.

This is the choice we’re after – we can educate and take care of the next generations or we can continue to mess it up. In the US, the war on education has taken a number of forms – one the age-old battle against teachers’ unions and the despicable salaries we pay to those who spend the vast majority of their waking hours either looking after our children or finding ways to make sure they know enough to get to the next level. Another is the fight against teaching science in all its forms, but primarily the teaching of evolution. I share the belief that no questions for which science provides an answer have been better answered by religion. (I’m sure there’s a better quote from someone like Sagan or Tyson, but that’s the gist.) In some regions, I’m distinctly in the minority and 90 years after the Scopes trial, we’re still fighting the same battle.

Yes, I’ve gone from discussing free education to useful education, but surely these things go hand in hand. We had a short period during which we as a culture recognised not only a right to an education, but a responsibility to educate the next generation. It’s possible that period ran only from the GI Bill to (in California) Proposition 13, but with the slashing of tax revenues from a variety of places (Governor Brownback’s Kansas fiasco being a major one), public education takes a big hit.

The upshot of this is that people in states with very high tax rates are still happier and better off by a number of measures than those in the low-tax United States. My guess is that a secure education and worry-free medical care play a very large role in that.

First off: I live in a country where the highest tax bracket is 52% and one reaches it pretty quickly. I’m an experienced technical writer by profession and could probably make USD 75-85,000/year if I returned to the US. I’ve worked in The Netherlands for over seven years and almost the entire time have had the benefit of what’s called the 30% ruling. Under this plan, the first 30% of the income of expats who qualify (based on age and earning capacity, primarily, though the tax authority here can be capricious) is untaxed. For the next 2 1/2 years, I will still benefit from this ruling. After that, half my income goes to the taxman.

When that time comes, I will probably complain a bit, as will my wife who earns a great deal more than I do. That said, we took on a mortgage three years ago and are generally happy to continue living here, even after our taxes go up. When we moved here, there were no austerity measures in place and the euro was a great deal stronger, but the system here mostly works. First responders are responsive, the city is clean, there are very few homeless. While we live in a college town about the size of Cambridge (123,000) and a little larger than Santa Barbara (90,000), even Amsterdam basically works as well – more homeless, more crime, but we’re not talking San Francisco levels of either.

I want to suggest that my tax euros go towards making the place I live a place I want to live. (Yes, I also pay a very small portion of Geert Wilders’ salary. It’s another price one pays to live in a democracy.) I don’t have a hard time saying that I don’t necessarily want those at the next income level above me to take a tax hike so that I can get a break. I don’t know much about the capital gains, inheritance, or corporate tax laws here. I also can’t speak for my family and friends in the US (where the top tax rate is much lower than it is in Nederland). That said, I think most of them aren’t so interested in tax cuts of their own, but would like to see higher taxes on the very wealthy so that the infrastructure of the US might work again.

NPR suggests, in a blog entitled State of the Union: 5 Things To Watch, that President Obama will introduce a plan to raise taxes on the wealthy in order to provide a tax break to working families. I know that money is tight all over, especially now that the 85 richest people in the world have as much wealth as the 3.5 billion poorest, and I would’t begrudge any working family whatever break they can manage. I would, however, say that tax increases on the wealthy might benefit working families in more ways:

  • After school programs so that kids have something to do while whatever parentage they have in the home can work until quitting time without worrying about what junior is up to
  • And on the subject of schools: smaller class size and better supported teachers.
    And on that topic: When did public school teachers, who do some of the hardest and most thankless work, become the bogeymen for all that is wrong in America?
  • Funding for public hospitals
  • training programs for the unemployed and underemployed
  • Fully staffed mental health facilities and VA hospitals

For a start.

When I moved to San Francisco in 1985, there were homeless, but they were mostly holdovers from the late 60s and people who followed expecting the city to resemble the parking lot at a Grateful Dead show. (A fine dream, but one that generally only existed at some music festivals.) That’s a bit disparaging, I know, but that was my experience of SF’s street population, such as it was when I was relatively young. The issues in San Francisco become much bigger with successive booms and busts and of course it’s happening again and on a larger scale with the most recent boom. With all the money that city has had for the last three decades, it’s never been able to address its own social issues, or think big enough to tackle them effectively. Higher taxes on business and the wealthy – if put to good use – might help. I use SF as an example I know (not that I know too many people who can still afford to live there – of 70 or so close friends who lived there when I left in 2002, I’m certain of four, two of whom managed to buy their own houses at auspicious times. Cities large and small across the US have impossible tasks of making the infrastructure work for the greatest numbers of people. I’m sure there’s more to say on the matter, but I think NPR’s bloggers, and possibly Obama as well, have it wrong if they think tax cuts are the only possible balance to tax increases on the wealthy. It’s not a zero sum game, either. Do those at the top really feel that a better functioning society isn’t to their benefit too?

ETA: I’ve now skimmed much of the SOTU address and was rather glad to see that Obama addressed these things as well. Of course with the Republicans in charge of both houses, we’re in for a rocky, suicide pill-laden two years, but I’m hopeful.