Sadly, yesterday’s “throw the bums out” election will miss the real source of economic inequality in the US today. In a new book entitled “Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class.” Jacob Hacker and Paul Pierson have uncovered a major source of the problem. Here are a few quotations from the book:
“Over the last generation more and more of the rewards of growth have gone to the rich and superrich. The rest of America, from the poor through the upper middle class, has fallen further and further behind.”
”[Politics] is a contest between those who are organized, who can really monitor what government is doing in a very complicated world and bring pressure effectively to bear on politicians. Voters in that kind of system are at a disadvantage when there aren’t reliable, organized groups representing them that have clout and can effectively communicate to them what is going on.”
“We’re not arguing that globalization and technological change don’t matter, but they aren’t by any means a sufficient explanation for this massive change in the distribution of wealth and income in the U.S. Much more important are the ways in which government has shaped the economy over this period through deregulation, through changes in industrial relations policies affecting labor unions, through corporate governance policies that have allowed C.E.O.’s to basically set their own pay, and so on.” {Source: Bob Herbert’s 11/01/2010 NYT editorial.}
Putting more Republicans in power is more likely to exacerbate than solve the problem.
I changed the title of the thread in order to broaden the subject under discussion to include the causes of other sources of economic pain.
That sounds like a good book. It’s nice to see this kind of analysis get an airing. Well done for a good catch, kat.
We are all looking forward to a much meaner, nastier world now. With an escalation of deregulation, tax cuts, smaller government for social welfare and larger government for the rich, the entitled, the corporate, the military-industrial complex, rightwing paramilitary and other predatory mercenaries, we are looking forward to a legitimation of white collar and government corruption on a very large scale. This will result in a widespread decimation of the education system into schools tiered according to money and intelligence by way of privatization in a manner that will allow charter schools to cage the system while public schools struggle more and more with inadequate teachers in more and more overcrowded and underfunded classrooms. Higher education will become virtually unaffordable for a larger number of people. And just as the education system will be changed to support corruption and caging, so will the criminal justice and prison system, which will become a corrupt nest of corporate owned institutions designed to house difficult minorites who will be disenfranchised and exploited for slave labor. . As for healthcare, it will become a very stark tragedy for the havelesses, even more so than it is now, as it too becomes a tiered system, with good care available for those who can afford it, and second rate to no care for those who can’t. Furthermore, with more deregulation and corporate favoritism, you can just say goodbye to environmental protections and safeguards for food and water. Of course, all of this is occurring already, but it’s going to get worse.
You could take my state, Texas, as the poster state for all of these trends. I used to think, only in Texas; but now I see that many other states are catching up fast. Sometimes I wish I could take the few decent blue states left, combine them into one country, and live there. Ah dreams.
The book sounds interesting, I’ll have to read it. Mostly I view elections like this as the results of the old tried-and-true, “It’s the economy, stupid!” Get rid of the perceived bad guys and hire those that tell us they’ll fix it for us. There are a few modern scary twists to this one, like tea partiers with little apparent ability to entertain complexity, or Rand Paul winning and Russ Feingold losing (WTF?!), or the Citizens United case (evidence of a truly rotten element on the Supreme Court now IMO), but the outcome isn’t all that surprising. The voting public, as a mass, is often simple-minded on these things. They must be, or you wouldn’t see the proliferation of ugly attack ads from both sides that are filled with lies and half-truths. Nobody would spend that degree of money if it didn’t work in persuading or motivating enough people. The politicians know that most Americans are either too lazy or too occupied with other things to actually learn about the issues and the candidates in much detail. So you lie about your opponent’s record and make sure that the ballot initiatives are confusing, lengthy, and worded obscurely enough so that people can’t understand them unless they spend time researching them before going to the polls.
You don’t even have to be a news junkie to learn how the corporatists are behind a lot of this stuff. Read about the Koch brothers and who they support politically. And about how the concentration of wealth in this country increasingly going to a small sliver of folks at the top is decimating the middle class. The rich pretty much have the lion’s share of the power now. I have this picture of them laughing and laughing as the hoards of yokels go to polls and vote against their own self interests. God, they must think it’s like taking candy from a baby.
Anyway, the new crop will have to make good on their word (yeah, when pigs fly) or they’ll get the boot next time around, too. It’s always a cycle, ALWAYS.
But this is a downward spiral, not a cycle. The decline and fall of America has been pretty much a fait accompli since Reagan was elected, it’s just a matter of getting slowed down a bit with the Dems and accelerated with the Reeps. Obama and his government did some good but not nearly enough to stem the decline, and with this new group of troglodytes in office, you aint seen nuthin yet. Washington will undo the momentum towards regulation and economic recovery as much as it can; they will succeed in ways you might not have considered yet. My advice: don’t be surprised at anything that happens, particularly when the dollar becomes weaker and economies continue to destabilize across the world. Even so, what is going to happen in the states that went red, or became more red than they already were, will change people’s lives dramatically. The infrastructure and the social fabric of the cities is going to undergo unimaginable stresses as state governments cut back budgets and target their money and efforts towards businesses who want carte blanche in all their practices. As all this plays out, just remember that you were part of this spiral, just as I do.
Worldwide salaries are between 100 to 800 dollars a month, even for service, health care, doctors, engineers, scientists, etc. By worldwide I mean India, China, Indonesia, Mexico, Turkey, Brazil, Russia, and others. The USA, EU, JAPAN and west in general etc. can in no possible way compete against these salaries no matter what they do, think or think they deserve: the workers of the rich countries must understand that the inequality between the first world and second or third world is over. Now either accept low pay (by western standards) or remain unemployed. The USA is particularly very high paid even compared to EU and JAPAN, at least paid twice as much on average. This is in no way sustainable anymore, in fact the jobs are going out of the USA and to where workers cost little money.
Automation, technology and internet etc. have rendered the world both smaller and have streamlined and eliminated and will increasingly eliminate many jobs no matter what. The USA cannot fool themselves that just hiking up the cost of college and health care can create those high paying jobs, this will not last and cannot last: in most of the world college and health care are either free or cost anywhere from 1/3 to 1/10 the cost in the USA.
Small businesses and all this startup myth, innovation myth, etc. will in no way create millions of real jobs that are needed. Remember even the rest of the world is researching and trying to grab a piece of the market pie, look at South Korea, they are heading towards world dominance in consumer electronics, etc.
What is needed is a huge decline in costs of real estate, houses must cost no more than 100,000 dollars in all of the USA, and I mean high quality 3 bedroom house, or a rent of no more than 200 dollars a month. If not, the USA is no longer competitive worldwide as housing forces companies to pay huge salaries compared to the rest of the world to allow people to pay high prices of rents or mortgages. Health care must be single system, government managed, close all private health care crap, do like in Europe or Canada, if you have the cash and want the private thieves and doctors you are free to pay as much as you want to the private system, if you are a normal slob like 90% of us, than it must be free like in Europe or JAPAN. If not, the USA is no longer competitive worldwide as health care forces companies to pay huge insurance and salaries compared to the rest of the world.
This is how it stands, this is what Obama should tell the people, this is the truth. But since people are idiots and suck, etc. nothing will change and everything will simply go to hell.
I think this is the wrong way to look at it. The US and the West in general was able to sustain high levels of pay because of its productivity. At the end of the day, the reason we want to be paid is so we can buy stuff. The stuff we buy has to be produced. A fair system allocates stuff based on contribution to its production. People in the US were highly paid, not because there was no competition, but because they are highly productive.
There is absolutely no reason why western levels of personal productivity cannot spread (as they are starting to) to the rest of the world. The result would be huge global productivity boom from which everybody will benefit. If the job of a Western health care professional, engineer or scientist can be done more cheaply by a colleague in India, that’s a great gain to society. To see that, imagine a great technological advance in Artificial Intelligence that allows computers to replace doctors in reading radiograms. Would you oppose such an advance because of its impact on the salary of radiologists? If such attitudes were applied consistently through history, we would still be digging for roots with our fingernails. If not, what’s the difference between being replaced by a machine, and being replaced by a cheaper foreign competitor? In either case, society as a whole benefits, because the same products and services can be provided more cheaply.
I agree. I have no idea why anybody thinks hiking costs of anything is a good idea. It seems to go together with deflation-phobia and desperate attempts to maintain unsustainably-high housing prices.
It is a myth that anybody, either in academia or in government, can predict and control where new jobs would come from. Even worse, there is a myth that the right way to look at economic recovery is “job creation”. It is the easiest thing in the world for government to “create jobs”. Just prohibit use of agricultural machinery, and millions of jobs will be magically “created”. The issue is not creating jobs, but rather allowing the most efficient production of goods and service that people are actually interested in (as measured by their willingness the pay for them, not just to vote for them).
Freeing entrepreneurs to search amongst almost-infinite variety of ways to satisfy consumer’s wants is the best way to do that. Trying to imposing elite’s (whether political or intellectual) visions of what and how such goods should be supplied is a recipe for disaster.
As per my previous answer, I wouldn’t pretend to know what is needed. There is no doubt that artificial elevation of housing prices is hugely damaging. Two main sources for high housing prices are (a) artificially-low long-term interest rates (just made worse by the Fed’s QE2), and (b) artificial restrictions on housing supply through zoning, “green belts”, etc. Compare stratospheric housing prices in the politically-strangled California to relatively modest prices in Texas.
Define productivity in a service economy. It is undefined as 70% of the US economy is services meaning, doctors and hospitals, insurance companies, financial services, education - colleges, etc. There is no way at all to define any concept of productivity in these realms, in fact the word is a bunch of BS. You can define it in manufacturing only, number of hours worked, output of item, end of story, the ruling class has brainwashed everyone that they are working in some kind of imaginary factory “producing” something, whereas nothing is being really produced, except for status relationships, fights, and a terribly inefficient use of resources, just look at financial services creating subprime loans, health care creating a hugely inefficient system of haves and have nots and creating work for thousands of lawyers (what is productive of having millions of lawyers in the US ?), education is not even defined as everyone has a different idea of what a person should know, etc.
This is right wing ideology, in that the jobs have to magically appear because entrepreneurs will create all these new huge industries. Nothing further from the truth, jobs are created, on purpose, according to what a society needs, as understand by science, not because we all need iphones. We also need cheap rents, public transportation and free health care. The free market created the most expensive health care on earth that sucks, subprime loans, huge home prices, unemployment, etc.
The free market sucks, we need to create huge government programs, trips to mars, we need to give out free salaries to all and cheap rents.
The myth of the startup, of “future jobs”, was based on that one time quirk that was the microprocessor, personal computer, software and then internet. This occurred only once and did create millions of jobs, just like the introduction of the car and jet travel did. But there are no new huge technological transformations on the radar in the future, and especially, if anything, they will kill as many jobs as possible by automating work by computers. Even if they do create new jobs, they will kill many more in the process.
[i]"I find it incredible that so many economists and smart people still believe that “More Demand for Goods and Services will Create More Employment”.
This no longer holds:
We live in mostly automatic societies - economies where most work is no longer needed, is automated, is optimized and will continually be further automated, optimized; the goal of any organization or company is to decrease, and decrease as much as is possible the number of employees it has, and this is what they will do no matter what;
Even if you do need “More Employees”, there are today so many options on the table: build factories in third world countries for people making 100 dollars a month salary; hire temp people for a month or two (heck even a year and then ax them) at low wages (since people have diminishing bargaining power, as being unemployed means your power is ZERO, you must accept whatever the Employer offers), make people work from the Internet (information workers beware), in this way you can choose from a pool of about 500 million people worldwide and choose the cheapest and best (Russian programmers are cheap and good), etc;
Even when demand increases, the relationship to Employment is non-linear, meaning that if a factory needs to build 30 % more cars it will not hire 30% more people, but jack up the working hours, working turns, and maybe hire a few temps (more like 3 or 4 % more). The same thing happens in Services and actually in Services most of the work is so phony and unnecessary that if demand increases I wouldn’t be surprised that they can make due with even less people, a negative relationship;
What we have today worldwide, in the globalized economy is a huge amount of Work Availability in terms of people that could potentially work, and a much smaller Need for this work, and the Need for this work is constantly going down with automation - computers - optimizations while the Availability is constantly increasing;
There is no counter force, no union, no nothing that is on the side of employees, the only thing that is happening is to make employees fight amongst each other for the breadcrumbs that will remain;
Services are supposed to create Employment, but only if people value or think the Services are worth the price: many are starting to doubt the real worth of “call centers”, Health Care Thieves of All Kinds, Education and Training towards imaginary jobs and positions that no longer exist, etc.
I find it amazing that in the Developed world there still are so many people “working”, I expect Unemployment to skyrocket in the USA, EU and JAPAN.
The only real solution to all of this is FREE SALARIES, that is what is needed, salaries of 1,000 dollars a month and CHEAP RENTS, rents of 200 dollars a month, no buying homes anymore or Home Ownership myth and crap. And a huge modern BUS transportation system, BUS MASS TRANSIT system (either public or private, doesn’t matter). I honestly cannot see how on earth, with present day technology and optimizations and the present combination of social forces, how on earth Employment is supposed to go up."[/i]
I thought your other analyses were spot on, but I’m not so sure about this one. I agree that the housing market is seriously over-inflated, and that many places need rent control. However, I think that it’s not practicable to lower rent by that much. $200 is a bit low. But it would depend on the size of the unit. Currently, the rents for units here depends on the size and location. I live in a great place which has a nice fitness center and wonderful pool, lots of green and green practices. It is a highly sought after location with 99% occuplancy, so rents are fairly high but not outrageous. However, houses rent for much more, even crummy ones; and the sale prices are high as well but not nearly as high as they are in some cities.
Still, in a struggling economy where jobs are much harder to come by, it would be nice to see housing deflate some. I think the worry is that deflation will hurt the economy more. It seems like a no-win situation.
The number of people making more than $50 million a year increased fivefold from 2008 to 2009. Last year investors and executives at the nation’s 38 largest companies earned a record $140 billion. Goldman Sachs paid bonuses to its employees that averaged nearly $600,000 per person, the best year since it was founded in 1869. If you are one of these people, the economy is doing fine.
Equivalent to 14 million 800 dollar a month jobs. That is where the jobs went, but that is because those 14 million unemployed don’t have the “right skill set”, didn’t “innovate enough”, “aren’t productive enough”, didn’t create the next Intel or Apple or IBM, etc.
Whereas those million or so who made 140,000 dollars actually did all of this…
And these are the people running our government and driving the rest of the world into ruin.
Sounds a bit obscene, doesn’t it? This kind of thing always raises my hackles and leads me to think about depth psychology more and more. How does the scarcity principle impact psychology? How do the manipulations of those with money drive the psychology of the ones who have to pay for all the plundering and looting? And how will this psychology affect the workings of societies?
I think it makes people crazy with hate and a need to find a scapegoat to blame and attack. All of the isms and phobias start coming into play, and no problems really get solved. People think they need to control or eliminate all the possible scapegoats, which include women, minorities, people of different faiths, liberals, intellectuals, homosexuals, and so on.
Now, for the robber barons and corporations to continue their unregulated practices unabated, they have to feed this hate and make it work in their favor. Thus they buy candidates and officials who will pass laws and promote policies that restrict the human rights of various targeted groups, while at the same always voting in favor of deregulation and privatization of all services and programs which will continue to move the money flow upwards.
I call it the Upsidedown Laffer Movement: Flood-up Economics. It should be taught as a course in all the schools.
I am not sure if you expect me not to repeat arguments already mentioned in those topics, or to suggest that the debate is over and the results are in…
I am happy to discuss your response to any of the points I made above. If I had to choose one, it would be regarding job creation.
There is really no difference, in principle. With either goods or services, productivity refers to the value (preferably measured using a stable yardstick like gold, rather than the ever-manipulable fiat dollar) of economically-valuable products of the economy.
While it might be easier to count widgets than hair-cuts, the critical stage of agreeing on the value of each is the same - it has to do with how much others are willing to (freely) pay for the product (good or service).
As I noted above, how do you compare computers to cars? You have to find a common denominator, normally money. The same denominator could be used to value people’s service productivity. Where is the difference?
I am not sure what you have in mind. When you get treated by a doctor, get a haircut or get served in a restaurant, these are not “status relationships” but actually valuable services for which people are willing to pay.
Each of those industries has suffered hugely from government meddling. Financial services react to artificially-low interest rates, moral hazard due to government bailouts, and the need to circumvent silly regulations. Health care in America is completely dominated by government payment programs (Medicare, Medicaid), tax-code distortions and barriers to entry through drug and professional licensing. Education is obviously all government dominated, both directly in government-run schools, and indirectly through student loans that help subsidize tuition fees balooning.
The point I made above, to which I hope you respond, is that job creation is meaningless. Any government can create as many jobs as it wants by fiat. The issue is productive jobs. The more productive people are, the higher their real pay. Government can print money and use it to employ people to dig and re-fill holes all day. Everybody would have a “well paying job”, but nobody would have anything to eat.
What government actually does with our money is only marginally better. It wastes it on projects that the market (i.e. the system where people actually put their money where their mouth is) have rejected.
People understandably confuse entrepreneurship with high-tech. Technically, as well as when I use the term, an entrepreneur is anybody who starts or expands a business in response to perceived unmet consumer demand. That applies equally to opening a new McDonald’s franchise as it does to starting a computer company.
There’s more than innovation, skill sets and productivity going on here. The 13 largest companies are Wal-Mart, Royal Dutch Shell, Exxon Mobil, BP, Toyota, Japan Post Holding, Sinpec, State Grid, AXA, and China National Petroleum, Chevron, ING Group, not your big innovators. What big business has actually done is gotten more active in Washington cultivating politicians in both parties to skew laws in their favor. At the same time, the effectiveness of organized labor, the most effective force fighting for working Americans, has declined. There is nothing to counteract the increasing political dominance of big business.
Actually, there is something to counteract the dominance of big business – the people. Did you see the article I posted by Bill Moyers who spoke about Howard Zinn and the idea that a democracy is a public responsibility?
When the people decide to get active on behalf of themselves and the country, that is when things will change and not before. Waiting for Big Daddy to change will not work.
So “capitalism” is creative destruction: then I love capitalism, what we need is to build a few billion mega skyscrapers across the earth and then nuke them all to dust with a few million hydrogen bombs, and let the cycle repeat every 10 years. The collateral damage, as a few bilion people is irrelevant, that is why we need huge population explosion, maybe just automate making people in huge genetic engineering factories that create them and grow them and program their brains in a few minutes, and the cycle repeats. And then we extend to the solar system, nuke all the planets, build and destroy skyscrapers like crazy, and then finally nuke the SUN with trillions of hydrogen bombs, KILL MOTHER NATURE, it dosn’t deserve to live in my book.
And create huge “car engine” accelerators that smash colliding car engines in high speed magnetrons that are a few 100km wide. Let’s rush to get Mother Nature on the run, watch out, Science, Technology and Progress are out to get you.
Matter goes on a field trip: the universe wants to have some fun, this is mind over matter big time.
Since no one really has a clue, everyone on earth generally sucks, I am the only one who knows the real solution, so listen up young man Odumbo, activate the following program immediately:
100 new rockets to Mars, manned missions within the year 2020.
1 million huge skyscrapers across the USA, in all of the major cities within the year 2020.
100 million new high quality homes built by the federal government having cheap rents, 200 dollars a month (2,000 sq ft - 180 sq m area) 3 bedrooms.
Free basc salaries to all.
Free health care to all.
A huge program for the future, progress, space exploration, modified brains, technological singularities.
End all wars.
A huge mass transit system across the USA, with BUSES, diesel - electric, chevy volt system.
All this BS about government intervening or big business buying government, etc. This is meaningless, the government has to provide cheap rents, free salaries and free health care. This must be forced, this must be done explicitly, on purpose, this must be demanded, with weapons if necessary.
You are wrong on all accounts: services have no value, can’t be measured, and most jobs in services are in offices where people just play the office politics game, we are not talking about concrete things like a hotel, restaurant or barber, these are obviously easy to see, understand and measure.
Don’t confuse and switch arguments: restaurants, barbers and hotels are mostly saturated markets, they will not create millions of jobs needed, and worldwide at least 100 million jobs are needed, so you have to just give the salaries out for free. People are willing to pay for what they have been brainwashed to pay for, like high home prices and lawyers so they can fight each other and have fun: people must be educated and consume what is really necessary, not what the capitalist bosses want you to buy from them.
Your right wing thug ideology has failed and is failing millions in the USA, this myth of the automatic market creating jobs and values is bogus, nothing is automatic, it must be forced.
List me 10,000 sectors that can create 10,000 jobs automatically, because it is an unmet need, some new and incredible need no one ever thought about, that will generate high paying jobs (at least 40,000 dollars a year?), some new sectors that will generate 8 hour a day jobs, that require 8 hours of specific information transformations and or physical transformations that no one has ever thought about, that is not a saturated market, that can’t be automated by computers or optimized or done in third world countries at 100 dollars a month salaries, and especially that will last more than just a few years like all of those dot com companies that went bust after thinking about all the jobs they would create. If you can, then you are our hero, thanks for telling us about all those activites that are needed and no one ever thought about.
Theoretically yes, but that doesn’t seem to be working well. Corporation heads and the wealthy have the inside track to information and influence. Government officials are the errand boys of the rich [Dewey]. “The people” can only very roughly make their will known as in Tuesday’s election. The wealthy have their hands on the reigns daily, the people only indirectly via polls or demonstrations or periodically via elections. The people are seriously overmatched.
Big business and the elite rich own both the government and the media. The media is skewed to the crazed extreme rightwing idiotology, and at the same time is buying and influencing politicians and elections. That is how we get truly crazed idiots as viable candidates.
This is NOT meaningless. It is a fact of life, as crazy as it is. The government as it is doesn’t HAVE to do anything except make sure that corporations and the rich elites can remain happy and careless in their wealth and power, regardless of what happens to other people or the environment.
I agree that both society and government SHOULD work differently. But as Bill Moyers recently pointed out when he spoke so eloquently on the work of the late great Howard Zinn, democracy is the responsibility of the people not a Big Daddy government who is just supposed to do the right thing by its kids. People need to grow up and let go of magical thinking. Then they can see things clearly and take action.
I’m not talking strictly about the vote here, though elections are important. However, they have to be both free and fair; and our elections have not been either for awhile.
Since our election system is now so broken and corrupt, then people will have to take action the brave and hard way, by organizing in mass numbers and acting in a way that gets attention over the long haul. This does not mean participating in a one-day demonstration, but rather doing something to influence minds and create the energy for bigtime changes.