inequality

What’s the matter with America?

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

US-wages-bottom50-top1

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.

Why equity-minded foundations are losing the war

Published by Anonymous (not verified) on Sun, 14/01/2018 - 11:01am in

In a thought-provoking analysis of the failure of equity-oriented foundations to reverse widening inequality, David Callahan of Inside Philanthropy writes:

Over the past few years, many foundations have put equity front and center in their work….

But guess what? Here in early 2018, economic stratification only seems to be getting worse in America. A new tax law just went into effect that economists say will increase inequality and likely lead to cuts in government safety net programs down the line. And around the U.S., governors and state legislatures are engaged in their own efforts to shift wealth upwards and cut social programs. Meanwhile, even as unemployment drops to near-record lows, millions of working Americans still can’t make ends meet, while the top 1 percent—which owns half of all stocks and mutual funds—grow ever richer from a historic bull market. In many gentrifying cities, boom times have made it harder for low-income households to get by, not easier, by driving up housing prices. And the only thing rising faster than housing prices, it seems, are healthcare premiums and college tuition.

In short, those funders working for equity and against inequality are getting their butts kicked. Why is that?

… here, in a nutshell, is why grantmaker efforts tend to yield so little success: Because equity-minded foundations keep failing to zero in on the all-important sphere of political economy. Inequality mainly stems from how the U.S. economy works and, critically, the range of public policies and power arrangements that govern economic life. Yet, instead of focusing laser-like on this fundamental reality, funders embrace overly diffuse, often localized strategies that yield few larger systemic gains. They win battles here and there, while losing the war.

Read more here.

Stephen Hawkings on Robots: It's the Distribution, Stupid.

Published by Anonymous (not verified) on Sat, 13/01/2018 - 5:21am in

I’ve seldom experienced déjà vu as strongly as I did reading Alexander C. Kaufman’s recent note on Stephen Hawkings’ brief Reddit AMA (h/t David Ruccio).

A member of the public asked:

  1. "Have you thought about the possibility of technological unemployment, where we develop automated processes that ultimately cause large unemployment by performing jobs faster and/or cheaper than people can perform them?
  2. "In particular, do you foresee a world where people work less because so much work is automated?
  3. "Do you think people will always either find work or manufacture more work to be done?"

See “technological unemployment” there?

Hawkings’ answer:

“If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.”

Judging by Kaufman’s story, that answer didn't soothe Hawkings' public. After adding a reference to Thomas Piketty’s work, Kaufman explicitly just joined the dots that were only implicit in Hawkings' answer: robots, by themselves, are not the problem; how benefits and costs of automation are distributed is.

Added productivity doesn’t necessarily benefit workers.

(source)
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Astute readers may wonder how all this talk, so 21st century, so cutting-edge, can remind one of anything. This may surprise them, but it can and, to top it all off, it’s something rather old, which has troubled the good and wise for a while.

In fairness I’m not the only one to notice it. Credit must go to David R. Henderson, too, from the Hoover Institution.

He has been wondering about automation and employment (he doesn’t care much about wages, though). Frankly, it ain’t an inspired piece (the chart above is enough to dismiss two points Henderson attempted: the effect of women in the jobs market and … “pay is closely tied to productivity”).

But my interest is not what Henderson got wrong, but what he almost got right.

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This is what.

A year after the September 1929 crash of NYSE, the Great Depression had gone global.


The world then (as today) was suffering “from a bad attack of economic pessimism”, as Keynes wrote in October 1930. People were talking of a lost decade.

The pessimists, Keynes thought, were wrong. So, to cheer the brooding public Keynes published a version of a short essay originally composed in 1928, before the depression. No depression could possibly shake his faith in capitalism. The result was “The Economic Possibilities for Our Grandchildren”.

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It took twelve years, the New Deal, and the Second World War mobilisation to return the US unemployment rate to pre-September 1929 levels: only in May 1942 it fell to pre-Depression levels. One may argue why it took that long until the cows come home: that it took that long is the fact.

All that sounds pretty modern, too, doesn't it?

Keynes’ pessimists weren’t too wrong, I’d say.

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“Economic Possibilities” must be one of Keynes’ most strange essays ever.

The man whom, according to Skidelsky, “rejected or ignored explanations of events in terms of vested interests and technology”, barely mentioned unemployment and when he finally did, he explained it thus:

“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come--namely, technological unemployment.” (Original emphasis)

One year into the Depression and scarcely six before the publication of his “General Theory” and one finds not even the subtlest hint Keynes thought aggregate demand had anything to do with unemployment. Hell, one doesn't find the term "aggregate demand", period. It's all about supply side.

Not only that. He added: “mankind is solving its economic problem” (Keynes' emphasis, too). Which is? Scarcity, not distribution. He just assumed people would earn a comfortable living with little effort.

That may sound like Utopia, but Keynes was no vulgar utopian, no siree: Those cashed-up involuntary slackers would feel awfully bored, he explained, just like “the wives of the well-to-do classes” in Britain and the US (whose wealth deprived them of cooking, cleaning, and mending and yet, couldn't “find anything more amusing” to do). They'd risk a “nervous breakdown”.

Keynes arrived at that "startling" conclusion after a historical survey beginning “two thousand years before Christ”. Within 100 years, he reckoned, we’ll live in paradisiacal boredom. In other words, he did in 1930 exactly what he condemned in 1923:

“This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.”

A historian of economic thought of the future could be forgiven to think Keynes never wrote that essay.

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Over decades many have attempted to make sense of “Economic Possibilities”. The focus generally is on Keynes’ quantitative predictions (“the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day”, “three-hour shifts or a fifteen-hour week”), things like how that Essay in Eccentricity fits within his overall work are never considered, at least in the popular literature.

So, let’s go with the flow. It's easier.

As we’ve seen, the shorter-term predictions of Keynes’ opponents (the pessimists) didn’t miss the mark by much.

How did his own longer-term predictions fare? Although per capita GDP has serious shortcomings, if one measured the “standard of life” in those terms, his first prediction may have been already fulfilled. The second prophecy, however -- it’s the general consensus -- went badly wrong and seems to be getting worse.

Why?

In a light-hearted piece, Elizabeth Kolbert searched everywhere for answers: from the absurd (according to a feminist author, it’s all men’s fault: they don’t do their fair share of domestic chores, dammit) to the even more absurd (she asked Gary Becker and Luis Rayo).

The Hoover Institution promotes a non-Keynesian interpretation of Keynes. Henderson tries to explain that failure, too: he does that within that interpretation.

The cake for the oddest, most absurd balloney explanation, however, must go to Tim Worstall: people work longer than Keynes predicted because women don’t need to spend as much time doing domestic chores as they used to. They aren’t bored any longer, nor they risk a nervous breakdown, because they’ve bought Ha Joon Chang’s Washing Machine ®, which deprives them of cooking, cleaning, and mending!

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A little thinking outside of the box could have saved all parties involved much effort. A couple of years after “Economic Possibilities” appeared, Bertrand Russell (“In Praise of Idleness”, Harper’s Magazine, October 1932 issue), a man personally, socially, culturally, and maybe even politically close to Keynes, surprisingly knowledgeable about economics, provided a good explanation, in the same playful spirit Kolbert employed:

“Suppose that at a given moment a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins as before. But the world does not need twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price. In a sensible world everybody concerned in the manufacture of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?”

A doubling in productivity, in other words, would have to translate into a halving of working time, for the same wages, for a Keynesian scenario to materialise. Nobody would have been worse off and workers would have been positively better off. That was the rosy scenario Keynes was peddling, with the kind of problems the “economically pessimistic” unemployed of 1930 would have loved to have.

That isn’t gonna happen, was Russell’s conclusion. Half the workers, he argued, will work as long as before for the same wages, producing twice as much, the other half will lose their jobs. Surviving bosses may double their profits.

That simple answer, obtained from a simple reasoning, seems to fit the relevant facts. Productivity has increased (tick), but wages remain stagnant (tick), overwork coexists with underemployment (tick) and the capital share went gangbuster (tick).

To make that easier to understand: it’s not the scarcity, but the distribution, stupid.

That sounds pretty much like what Hawkings said, only more detailed, yes? That would be enough to explain the déjà vu feeling, but in truth, there’s more.

Here’s Brad DeLong channeling Keynes. The problem with the alleged end of scarcity, DeLong believes, is not that people are poor but that they have no jobs. Because, you see, people want to work for work’s sake, pay be damned. But he ain't just repeating Keynes' odd essay. He replaced being bored by being "phished for phools"! (Why he kept the middle F is just another mystery).

Oh God, have mercy on us. Give us strength.

UPDATE:
14-01-2018. To avoid putting words unduly -- and unintentionally -- in Hawkings' mouth, I made it more explicit who wrote that it was capitalism that one should worry about.

Economic theory of relativity

Published by Anonymous (not verified) on Fri, 12/01/2018 - 12:46pm in

Writing in the New Yorker, Elizabeth Kolbert describes recent research on the human aversion to inequality:

As any parent knows, children watch carefully when goodies are divvied up. A few years ago, a team of psychologists set out to study how kids too young to wield the word “unfair” would respond to unfairness. They recruited a bunch of preschoolers and grouped them in pairs. The children were offered some blocks to play with and then, after a while, were asked to put them away. As a reward for tidying up, the kids were given stickers. No matter how much each child had contributed to the cleanup effort, one received four stickers and the other two. According to the Centers for Disease Control and Prevention, children shouldn’t be expected to grasp the idea of counting before the age of four. But even three-year-olds seemed to understand when they’d been screwed. Most of the two-sticker recipients looked enviously at the holdings of their partners. Some said they wanted more. A number of the four-sticker recipients also seemed dismayed by the distribution, or perhaps by their partners’ protests, and handed over some of their winnings. “We can . . . be confident that these actions were guided by an understanding of equality, because in all cases they offered one and only one sticker, which made the outcomes equal,” the researchers reported. The results, they concluded, show that “the emotional response to unfairness emerges very early.”

Read more here.

Inequality in Europe

Published by Anonymous (not verified) on Thu, 11/01/2018 - 6:35pm in

I repost this from Social Europe (which is a site I recommend) because I think it links to a book many readers here will find interesting (and it is free):

Then US President Barack Obama said inequality was the defining issue of our time at the end of 2013. Almost half a decade later we unfortunately have to conclude that it still is one of the defining issues of our time and that we have seen the beginning of a political feedback loop. The unresolved inequality challenges amongst other things contributed to the the Brexit vote in the United Kingdom and the election of Donald Trump in the United States. It was not just the persistent patterns of huge inequalities between different parts of society but also the growing frustration that political systems have become unresponsive to the concerns of people suffering from the current state of affairs. When analysing the challenge of right-wing populism it is crucial not to do so at a superficial level only trying to dissect the communication techniques and understanding the current electoral appeal of populists – as important as this is. It is at least equally important to try to understand the socio-economic and political conditions that enabled those communication techniques to develop electoral appeal. Inequality is a huge part of this background story.

Inequality will be an important public policy issue for years to come and we hope this dossier will promote understanding of some of the underlying issues and inform the development of effective policy solutions.For this reason, Social Europe teamed up again with the Europe Office of the Friedrich-Ebert-Stiftung and the Institute of Economic and Social Research of the Hans Böckler Stiftung in a project investigating various aspects of the inequality issue with a specific perspective on the European dimension of inequality. Over the course of several months we collected fifteen contributions by globally leading experts to help getting a grip on what inequality means today. These contributions form the three parts of this dossier starting with a general section on understanding inequality and related issues such as globalisation, migration and populism followed by chapters on inequality in Europe and a final part investigating the inequality dimension in specific policy areas.

Inequality will be an important public policy issue for years to come and we hope this dossier will promote understanding of some of the underlying issues and inform the development of effective policy solutions.

The elephant in the world

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

E4

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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in NYC spring 2018 semester? looking for a PhD-level course on “Change and Crisis in Universities?”

Published by Anonymous (not verified) on Tue, 09/01/2018 - 7:12am in

Are you a graduate student in the Inter-University Doctoral Consortium or a CUNY graduate student?*  If so, please consider taking “Change & Crisis in Universities: Research, Education, and Equity in Uncertain Times” class at the Graduate Center, CUNY.  This course is cross-listed in the Sociology, Urban Education and Interdisciplinary Studies programs.

Ruth Milkman and I are co-teaching this class together this spring on Tuesdays 4:15-6:15pm.  Our course topics draw on research in organizations, labor, and inequality.  This course starts on Tues., Jan. 30, 2018.

Here’s our course description:

 

This course examines recent trends affecting higher education, with special attention to how those trends exacerbate class, race/ethnicity, and gender inequalities. With the rising hegemony of a market logic, colleges and universities have been transformed into entrepreneurial institutions. Inequality has widened between elite private universities with vast resources and public institutions where students and faculty must “do more with less,” and austerity has fostered skyrocketing tuition and student debt. Tenure-track faculty lines have eroded as contingent academic employment balloons.  The rise of on-line “learning” and expanding class sizes have raised concerns about the quality of higher education, student retention rates, and faculty workloads.  Despite higher education’s professed commitment to diversity, disadvantaged racial and ethnic groups remain underrepresented, especially among faculty. Amid growing concerns about the impact of micro-aggressions, harassment, and even violence on college campuses, liberal academic traditions are under attack from the right. Drawing on social science research on inequality, organizations, occupations, and labor, this course will explore such developments, as well as recent efforts by students and faculty to reclaim higher education institutions.

We plan to read articles and books on the above topics, some of which have been covered by orgtheory posts and discussions such as epopp’s edited RSO volume, Armstrong and Hamilton’s Paying for the Party, and McMillan Cottom’s Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.  We’ll also be discussing readings by two of our guestbloggers as well, Ellen Berrey and Caroline W. Lee.

*If you are a student at one of the below schools, you may be eligible, after filing  paperwork by the GC and your institution’s deadlines, to take classes within the Consortium:

Columbia University, GSAS
Princeton University – The Graduate School
CUNY Graduate Center
Rutgers University
Fordham University, GSAS
Stony Brook University
Graduate Faculty, New School University
Teachers College, Columbia University
New York University, GSAS, Steinhardt

Cartoon of the day

Published by Anonymous (not verified) on Mon, 08/01/2018 - 11:00pm in

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010218HomelessR

No one should have to quit in 2018 over unequal pay. #PutItRightNow

Published by Anonymous (not verified) on Mon, 08/01/2018 - 7:42pm in

No one should have to quit in 2018 over unequal pay.

No one.

Anywhere.

And especially in the BBC.

#PutItRight

Now

Fully Automated Luxury Socialism: The Case for a New Public Sector

Published by Anonymous (not verified) on Mon, 08/01/2018 - 7:15pm in

The rise of the service sector eased the pressures of deindustrialization and automation. But it didn’t change the power relations in the economy—and neither will a basic income.

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