1 percent

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Published by Anonymous (not verified) on Wed, 21/02/2018 - 11:00pm in

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206338  Wash, Rinse, Repeat

What, us worry?

Published by Anonymous (not verified) on Wed, 21/02/2018 - 12:00am in

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Ed Wolff is right:

For the vast majority of Americans, fluctuations in the stock market have relatively little effect on their wealth, or well-being, for that matter.

That’s because, as his research shows (and as I illustrate in the chart above), the bottom 90 percent of Americans own (either directly or indirectly) a tiny share—16 percent—of total stock value in the United States.* The rest is owned by the top 10 percent: 40.3 percent by just the top one percent (with a net worth in 2016 of $10,257,000 or more) and 43.6 percent by the next nine percent (who have a net worth between $1,143,200 and $10,257,000).

The fact is, the only real wealth owned by the vast majority of Americans is their principal residence. Otherwise, they’re forced to have the freedom to get by on their wages and salaries—not dividends or capital gains—and, when they retire, on their meager pensions and Social Security. Those at the top are the ones who are most involved in the stock-market casino.

But that doesn’t mean the rest of us shouldn’t be worried, perhaps especially when the stock market is booming. That’s because stock prices are correlated with both corporate profits and income inequality. More surplus is being extracted and then distributed to be used—by corporations and wealthy individuals—to purchase corporate equities, thus driving up stock prices and making existing inequalities even more obscene. The rest of Americans are increasingly being left behind, subject to the dictates of their employers and the decisions made by those at the top.

And when that same group at the top decides to sell—because they’re worried about workers’ wages (which are still barely rising) or inflation (because interest rates may rise, thus making the money they borrow more expensive)—stock prices go through a “correction.”

No, the members of the bottom 90 percent are not much affected in terms of their wealth but they are buffeted by the resulting decisions taken by their employers and the small group of wealthy, stock-owning individuals—to accumulate capital or not in a particular line of business (which affects workers and their communities), to pursue changes in government policies in terms of both revenues (because they’d rather lend money to finance government deficits instead of being taxed) and expenditures (these days, to further weaken what remains of the social safety net), and so on. All of them decisions that are completely outside and beyond control of the members of the 90 percent.

So, while the stock market is a speculative casino that is driven by decisions and mostly affects the wealth of the top 10 percent, its fluctuations reverberate throughout the rest of the economy and society—both on the way up and on the way down.

That’s why everyone, especially the vast majority who don’t own much in the way of stocks, should be worried. Not of course in the same way as those who have a direct stake in the stock market, who make and lose fortunes on a daily basis. Just in the past two decades (in 2001 and then again in 2008), people have seen how there’s no clear separation or dividing line between Main Street and Wall Street. The decisions concerning the vast surplus those at the top appropriate and control are driving the current fluctuations on both streets.

What should most worry the members of the bottom 90 percent is the fact that, within capitalism, the individually rational decisions of those at the top—including the decisions or whether to buy or sell stocks—can and often do have social ramifications.

Our worries are different, which is precisely why it’s time for those at the bottom to imagine and enact a radically different set of economic and social institutions.

 

*Stock ownership includes direct ownership of stock shares and indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k) plans, and other retirement accounts.

Cartoon of the day

Published by Anonymous (not verified) on Mon, 12/02/2018 - 12:00am in

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Cartoon of the day

Published by Anonymous (not verified) on Mon, 05/02/2018 - 12:00am in

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What’s the matter with America?

Published by Anonymous (not verified) on Wed, 17/01/2018 - 12:00am in

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Last week, Thomas Frank welcomed Paul Krugman to the ranks of those who believe that the American working-class in recent decades has often voted against its fundamental economic interests by supporting conservative Republicans.

Appropriately enough, Frank then chastises Krugman for having repeatedly used his New York Times column to argue exactly the opposite, denying the idea that working-class Americans had defected to the Republican Party.

Frank, the author of What’s the Matter with Kansas? then draws the appropriate conclusion: that the tendency on the part of Krugman and other liberals to underestimate working-class conservatism, in both southern and northern states, prepared the way for Donald Trump’s victory in the presidential election of November 2016.

To be clear, we’re not talking about the entire American working-class. Working-class whites have been more likely to vote against their economic interests and to be persuaded by the kinds of cultural, identity issues raised by Trump and other Republican politicians. Not so with Hispanics, latinos, and other members of the American working-class—although, according to Stephen Morgan and Jiwon Lee, minorities did have lower turnout in competitive states in 2016.

But I think Frank and Krugman have it only half right. Their view is that the working-class, if it voted according to its economic interests, would stop supporting Republicans and return to the Democratic Party fold.

The problem is, as is clear from the chart at the top of the post, the American working-class has lost out under a long series of both Republican and Democratic administrations. Neither party—conservative or liberal—has reflected the interests of working-class Americans in recent decades.

For example, between 1970 and 2014, the share of wages in national income plummeted from 51.5 percent to 42.3 percent.* As a result, the share of income going to the bottom 50 percent of Americans has literally collapsed, falling from 17.8 percent in 1970 to only 12.5 percent in 2014.

Meanwhile, the top 1 percent has enjoyed enormous success: its share of pre-tax income has soared in the past four and a half decades, rising from 12.5 percent to over 20 percent.

The problem for the American working-class is that neither party represents its interests—and no new party has emerged, at least on a national level, to take their place. So, working-class voters are left to float, under increasingly precarious economic conditions, in support of politicians from both parties who have pandered to a variety of identities and issues but have done nothing to effectively reverse the insults and injuries inflicted upon the American working-class in recent decades.

That’s what’s the matter with the United States.

 

*And, remember (as I explained in 2015), the wage share includes the salaries of CEOs and others at the top of the scale, which should rightly be excluded as distributions of the surplus. If they were subtracted, the share going to working-class Americans would have fallen even further.

The elephant in the world

Published by Anonymous (not verified) on Wed, 10/01/2018 - 12:00am in

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One of the most important stories I read, but did not write about, while I was away was the launch of the World Inequality Report 2018.*

The authors of the report confirm what Branko Milanovic and others had previously discovered: that a representation of the unequal gains in world economic growth in recent decades looks like an elephant. Thus, the real incomes of the bottom 50 percent of the world’s population (except the poorest, at the very bottom) have increased, the incomes of those in the middle (especially the working-class in the United States and Western Europe) have decreased, and the global top 1 percent has captured an outsized portion of world economic growth since 1980.**

As I explained back in 2016, the “elephant curve” makes sense of some of the significant changes within global capitalism:

At one time (especially in the nineteenth century), [capitalist globalization] meant industrialization in the global north and deindustrialization in the mostly noncapitalist global south (which were, in turn, transformed into providers of raw materials, which became cheap commodity inputs into northern capitalist production). Later, especially after decolonization (following World War II), we saw the beginnings of capitalist development in the south (under the aegis of the state, with a set of policies we often refer to as import-substitution industrialization), which involved a reindustrialization of the south (producing consumer goods that were previously imported) and a change in the kinds of industry prevalent in the north (which both exported consumer goods to the rest of the world, which after the first Great Depression and world war were once again growing, and often provided inputs into the production of consumer goods elsewhere). Later (especially from the 1980s onward), with the accumulation of capital in India, China, Brazil, and elsewhere, noncapitalist economies were disrupted and millions of peasants and rural workers (and their children) were forced to have the freedom to sell their ability to work in urban factories and offices. As a result, their monetary incomes rose (which is not to say their conditions of life necessarily improved), which is reflected in the growing elephant-body of the global distribution of income.

But that’s not the real elephant in the world. The big issue that everyone is aware of, but nobody wants to talk about, is the obscene degree of economic inequality in the United States.

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As it turns out, if the global distribution of income in the future followed the trajectory set by the United States, inequality would significantly increase. As is clear in the chart above, the share of income going to the top 1 percent would rise dramatically (from less than 21 percent today to close to 28 percent of global income by 2050) and that of the bottom 50 percent would fall off precipitously (from approximately 10 percent today to close to 6 percent).

The grotesque level of inequality in the United States—now and as it worsens looking forward, with stagnant wages and enormous tax cuts for large corporations and wealthy individuals—is the real elephant in the world.

 

*The World Inequality Report, created by the World Inequality Labis the latest in a series of major surveys of the world economy, which includes the World Bank’s World Development Report (beginning in 1978), the International Monetary Fund’s World Economic Outlook (beginning in 1980, first published annually, then biannually), and the United Nation’s Human Development Report (beginning in 1990). Each, of course, uses a different lens to make sense of what is going on in the world economy.

**The elephant curve combines two different scaling methods of the horizontal axis: one by population size (meaning that the distance between different points on the x-axis is proportional to the size of the population of the corresponding income group), the other by the share of growth captured by income group (such that the distance between different points on the x-axis is proportional to the share of growth captured by the corresponding income group), as in the charts below:

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Cartoon of the day

Published by Anonymous (not verified) on Sun, 07/01/2018 - 12:00am in

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Cartoon of the day

Published by Anonymous (not verified) on Mon, 01/01/2018 - 12:00am in

Mean exchanges

Published by Anonymous (not verified) on Fri, 29/12/2017 - 3:58am in

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Yesterday, I discussed the mean-spiritedness of the Republican tax cuts—which are being sold as a gift to the middle-class but, in reality, represent a massive transfer to a small group of large corporations and wealthy individuals.

But, of course, the real violence associated with the tax-cut gift occurs before federal taxes are even levied, in the pre-tax distribution of income.

As is clear from the chart above, since the mid-1970s, the share of income captured by the top 1 percent (the red line, measured on the right-hand side) has almost doubled, rising from 10.6 percent to over 20 percent. Meanwhile, the share of income going to the middle 40 percent (the blue line, on the left) has eroded, falling from 45.2 percent to 40.4 percent.

But that’s not enough for those at the top. They want even more—and their growing share of the surplus has given them more power to elect the candidates and write the rules to obtain even more income, both before and after taxes.

Meanwhile, many in the languishing middle-class, having given up hope for any improvement in their pre-tax income share, threw in their lot with the Republicans and their promise of tax relief.

They now know that that’s a dead end, too.

The American middle-class continues to lose out, both when they exchange their ability to work for an income in markets and afterwards, when they pay their taxes to the government.

Meanwhile, the tiny group at the top has been able to rig both mechanisms, exchange and taxes, to capture and keep more of the surplus.

Something clearly has to give.

Tagged: 1 percent, exchange, gift, income, inequality, middle-class, taxes, United States, violence

Mean gifts

Published by Anonymous (not verified) on Thu, 28/12/2017 - 2:26am in

Finally, in this season of the gift, something other than the usual, tired discussion of “deadweight loss” by mainstream economists.

Deborah Y. Cohn explains that “sometimes people give bad gifts on purpose.”

Although it seems nonsensical to give someone a gift that will damage a relationship rather than strengthen it, some people deliberately do just that.

Not only are these returns a drag for businesses, they harm friendships and fray family bonds.

Of course, historically there are plenty of examples of mean-spirited, even violent gift-giving. Potlatch in the Pacific Northwest is a good example—of chiefs giving away or destroying goods in order to create or reinforce relations of unequal power within and between clans, villages, and nations.

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The Republican tax bill, which President Trump signed last Friday, is another example of the violence of the gift. With one exception: whereas in potlatch the hosts demonstrate their wealth and prominence through giving away goods to everyone else, “The Tax Cuts and Jobs Act” will mostly benefit a small group of corporations and individuals that already capture and distribute to themselves most of the surplus.

Trump, Mitch McConnell, and Paul Ryan may be using the rhetoric of a gift to the middle-class but, according to a recent poll, most people remain unconvinced. They know they’re only getting pennies on the dollar of tax cuts to those at the top.

the NBC/WSJ poll finds 63 percent of Americans who think the Trump tax plan was designed mostly to benefit corporations and the wealthy, compared with 22 percent who believe it was designed to help all Americans equally.

Just 7 percent say it was designed mostly to help the middle class.

The question is, will the tax-cut gift serve to demonstrate the power of large corporations and wealth individuals or will it undermine their legitimacy?

At least right now, most people seem prepared to refuse the mean gift.

Tagged: 1 percent, corporations, gift, history, legitimacy, Mitch McConnell, Paul Ryan, potlatch, Republicans, tax cuts, Trump, violence

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