from Peter Radford
Dean Baker complains about AIG bonuses being honored because they’re contracts, whereas Detroit and, possibly, Chicago city employees pensions are in line to be slashed despite being contracts.
Such is life in a plutocracy.
This really ought not surprise anyone. The rules for the elite are, and have always been, different. A contract to pay the CEO of a large financial company that had to be saved by taxpayers and whose activities contributes mightily to the enormous economic crisis we are still trying to leave behind is considered sacrosanct. After all it is a contract. And we know what that means. Well it means we have to pay up even though its morally repugnant, smacks of corruption, and is just plain daft. The contract has to stay.
But those workers out in Detroit, they contributed to the problems Detroit had. They pretty much drove it into bankruptcy because of their padded employee benefits and wages. Chicago looks like it’s going down the same road. Those contracts are the cause of the problem. The city has every right to break the contract as part of its bankruptcy proceedings. In this case the contract is repugnant, possibly corrupted by unions influence, and is just plain daft. It has to go.
It used to be comforting to think that the saying “one rule for the rich, another for the poor” was just that: a saying. We could all pretend that America was a land of equal laws, even though we all knew deep down that rich folk can always get away with stuff we can’t. Read more…
from Peter Radford
The end, that is, of Reaganism.
The Republicans have shut down government because no one is taking their demand that health care reform is abandoned seriously.
In a nutshell the fight is over the part of reform that increases taxes on the top 1% of income earners, reduces subsidies to insurers within the Medicare system, and thus can afford to provide health care to tens of millions of previously uninsured people. That’s it. The Republicans failed to defeat these things during the law’s passage; the law stood up to challenge in the Supreme Court; and subsequently a presidential election was fought, with the winner being the advocate of the law. That’s pretty conclusive. The reform has been constitutionally and electorally approved.
But the extremists now running the Republican party think they can ignore all that. They abhor reform and so have taken to insurgency. Their defense of the wealthy to the detriment of the poor and the sick is open class warfare. It can be construed in no other way. Unless the extremists go through some radical change, their intransigence and defense of the privileged will lap over into a fight over the debt ceiling.
Which is odd, isn’t it? Because the privileged stand to lose the most when our credit worthiness is undermined. They are, after all, the holders of most of our collective wealth.
I see this in historical terms. Read more…
from Fred Zaman
“In his General Theory, John Maynard Keynes stated that classical economists ‘resemble Euclidean Geometers in a non Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight—as the only remedy for the unfortunate collisions which are occurring. Yet in truth there is no remedy except to throw over the axiom of parallels and to work out a non Euclidean geometry. Something similar is required today in economics.’” (Paul Davidson, The Keynes Solution, Ch. 4)
In this Euclidean analogy with the classical analysis of free
markets, which is based on “efficient market theory,” Davidson explains that
full employment is the Euclidean equivalent of parallel lines which never meet.
He nonetheless notes, however, that in the real world these lines, although
parallel in an Euclidean analogy with economics, nevertheless unfortunately do
often meet, thereby significantly and persistently producing economic
“collisions” understood as unemployment; the blame for which collisions always
is placed on workers for not passively accepting lower wages, and consequently
also a lower standard of living. Keynes’s solution, Read more…
from David Ruccio
from Dean Baker
At this point everyone knows about Fix the Debt. It is a collection of corporate CEOs put together by Peter Peterson, the Wall Street private equity mogul. Ostensibly they want to reduce budget deficits and the national debt, but for some reason their attention always seems focused on cutting Social Security and Medicare. While some in this group will allow for minor tax increases, budget cuts are explicitly a priority, with these two programs firmly in their crosshairs.
Given that the stated goal of this group is to reduce budget deficits, it is worth asking why taxes don’t figure more prominently on their agenda. After all, the United States ranks near the bottom of wealthy countries in its tax take as a share of GDP. It is also worth asking why one tax in particular, a financial transactions tax, never seems to get mentioned in anything the group or its members do. Read more…
From Edward Fullbrook
David Ruccio‘s post yesterday on the 34-year (and still continuing) period of radical income redistribution in the United States featured a graph from a new report from the Economic Policy Institute. Below, from the same EPI report, is a table no less shocking than yesterday’s graph. Read more…
from David Ruccio
Just as we expected: the incomes of those at the very top have rebounded in dramatic fashion.
from Dean Baker
Many people have been asking about the Justice Department’s priorities in the wake of the suicide of computer whiz and political activist Aaron Swartz. As has been widely reported, the Justice Department was pressing charges that carried several decades of prison time against Swartz. He was caught hacking M.I.T.’s computer system in an apparent effort to make large amounts of academic research freely available to the public.
The Justice Department’s determination to commit substantial time and resources to prosecuting Swartz presents a striking contrast to its see-no-evil attitude when it comes to financial fraud by the Wall Street banks. People should recognize that this is not just a rhetorical point. It is clear that the Justice Department opted to not pursue the sort of investigations that could have landed many high-level people at places like Goldman Sachs and Citigroup behind bars. Read more…
from David Ruccio
Paul Krugman is correct (which is not something I often have the occasion to write): “that while the election is over, the class war isn’t.”
The same people who bet big on Mr. Romney, and lost, are now trying to win by stealth — in the name of fiscal responsibility — the ground they failed to gain in an open election.
Yes, but. . .
The class wars are not just about fiscal deficits, taxes, and entitlements—although they certainly are about those, to the extent they impinge on how much of the surplus corporations and members of the 1 percent get to keep.
They’re also about what happens long before government taxes and expenditures come into play. As it turns out, and as the graph below shows, U.S. corporate profits reached a record high in the third quarter of this year, even adjusted for inflation, according to a report from the Bureau of Economic Analysis. Read more…
Social movements unsupported by strong intellectual storylines rarely prove successful. For example, despite the everyday obviousness of their subjection, a century of brave women struggling for liberation never got beyond step one, the vote, until Beauvoir’s The Second Sex and its subsequent popularizations made both the injustice and the possibility of victory intellectually comprehensible.
The 99% Movement has emerged out of the street-level fallout from the stark reversal of the primary societal trends that for generations characterised the US, Canada and other countries: the now rapid and accelerating movement of wealth, income, opportunity and power away from the middle classes and into the hands of the wealthiest 1%, especially the 0.1%. It is as if when no one was looking the socio-economics hourglass has been turned upside down. And why was no one looking? Because there was no theory or social narrative through which to view it. It is not just science that needs theories to be able to see empirical reality. They are just as crucial, if not more so to societies. That is why, for example, Thomas Paine was so important to the success of the American Revolution. If there is no story that explains what is and how it came to be and moreover one that offers a possible victorious ending (“I have a dream.”), movements die a slow death under the weight of their grievances and the cost of their tactics.
Without the Beauvoirs major social movements become marooned at the tactical level. Festering soon follows. The 99% Movement has not yet begun to fester, but it will if it does not begin now to integrate its gritty street-level narrative with a strategic intellectual one. Until a few weeks ago no such possibility existed. But now it does thanks to L. Frederick Zaman’s paper in the current issue of the Real-World Economic Review.
Zaman’s primary inspiration, contrary to what his paper’s title suggests and also to what almost anyone might guess, is Adam Smith. Read more…
from Deniz Kellecioglu
The top richest individuals of the world have economically recovered from the global financial crises and its aftermath. They are now actually wealthier than five years ago.
A look at the Forbes annual lists of the world’s billionaires reveal that this group had their wealth almost halved between 2008 and 2009. However, this proved to be just a temporary slump as all their losses were recovered in just two years (see table below). If people in poverty could also recover like that, it would be easy to eradicate poverty. Read more…
from Ian Fletcher
“every idea in this article is stolen straight from Thorstein Veblen.”
I had one of those “Aha!” moments recently.
I was engaged in an e-mail dialogue with a moderately prominent individual active in America’s international trade relations. He’s a former high-ranking public official, important enough to matter but not a household name. You might recognize him if you follow trade politics closely. Democrat, left-of-center, but nothing radical.
Anyhow, what I realized, in the course of this discussion, was that we were, in fact, arguing at cross purposes.
I viewed the American economy as a thing whose purpose is to provide income and a living standard to Americans.
He viewed it as a thing whose purpose was to provide a platform for projecting power in the world.
I mean, he didn’t say it quite so explicitly, but that was the bottom line of every train of argument we pursued. It was the only interpretation of his words under which they made any sense.
I can’t give you any more details because of my need to respect confidentiality. But I think his attitude explains a lot about how we are governed, because I think this is how America’s ruling elite really thinks.
I believe our ruling elite isn’t merely greedy for money. I believe they’re also greedy for something far worse. I believe they’re also greedy for world power beyond any extent to which this either serves American national security—or, for that matter, makes them richer.
I believe they privately view this country as their horse, upon which they ride in a global jousting tournament with rival elites. And they only really care about America, and the strength of its economy, insofar as it gives them a better horse to ride on. Read more…
from David Ruccio
David Leonhardt, in an otherwise interesting post on slow economic growth and increasing inequality in the United States, “which has concentrated the economy’s modest gains among a small share of the population,” actually underestimates the increase in inequality over the course of the past three decades. Read more…
from Robert R Locke
I think the people in this blog need to show more leadership. That might be hard to understand for those who are use to thinking of the economy as a self-regulating mechanism and of economists as observers and thinkers. But the economic crisis is too important to be left to passivity.
The problem area is not difficult to identify. It is not socialism versus capitalism or free enterprise versus government, as neoliberal, tea party ideologues would have it. The problem that real world bloggers need actively to investigate and manage is a massive system of private investor capitalism at the heart of today’s economy. It emerged from five post WWII mostly noneconomic phenomena: First the information revolution that spun out of the Pentagon during the Cold War, which allows twenty-four hour a day trading of financial packages on money markets worldwide. Two, the end of the Cold War, which opened up vast stretches of the former Communist world to private investor capitalism in an integrated system of stock markets and financial service, Three, the growth of institutional investors in associations like private pension funds that funnel unprecedented amounts of money into private equities, hedge funds, and investment banks. Four, the rapid growth of business schools and departments of finance economics that preach an ideology of unrestrained private investor capitalism and furnish investor capitalism’s skilled labor force, and Five, the development of neoliberalism in economics that justifies the ethical bankruptcy of investor capitalism. Read more…
from Peter Radford
Some quick thoughts for a summer weekend:
I am reading Richard Posner’s book: “The Crisis of Capitalist Democracy”. He and I do not agree on much, if anything, but the book is s decent read and gives a perspective worth knowing. But I could not avoid choking on my coffee when he describes the activities and policy decisions way back during the height of the crisis. Various actions were considered, most dismissed as inappropriate. My favorite, nationalization, was knocked down early. Why? Let Posner tell us: Read more…
from David Ruccio
The OECD misses the story because of (a) how they measure inequality—they focus on the gap between the top and bottom deciles (the richest 10 percent of the population versus the bottom 10 percent) and forget about the growing inequality within the top 10 percent, especially the share of income going to the top 1 percent—and (b) how they determine the causes of inequality—focusing too much attention on the effects of technology and not enough on changing labor market institutions and the growth of finance. Read more…
from David Ruccio
American exceptionalism has long been a contested notion.
But there is one area in which the United States has been exceptional from the very declaration of independence: the relative inequality of the distribution of income.
In 1774, the United States was much more equal than England and Wales (and more equal, it seems, than other western societies, such as the Netherlands). Today, more than 200 hundred years later, the United States is more unequal than any of the other advanced capitalist nations.
Thanks to recent research by Peter H. Lindert and Jeffrey G. Williamson, we know that in 1774 the top 1 percent of households had about 9 percent of income—compared to 17.5 percent in England and Wales, and 17 percent in the Netherlands. Read more…
from Susan Feiner
A camel and a rich man walked into a fun house. Reflections bend. Turning to each other they asked, “Mirror, mirror on the wall, who’s unfairest of them all?”
Rich man: “Say what? This is the fairest place in the world. America is the land of opportunity.”
Camel said: “Not now. Things have changed. In America if you’re born poor, you’ll probably stay poor. Sixty-five percent of Americans born into the bottom fifth of the population stay there, and only 8 percent of the men born at the bottom make it to the top. But 12 percent of British men, and 14 percent of Danish men climb to the highest strata of their societies. Don’t believe me? International comparisons ‘shocked’ John Ridgeland, former aide to President George W. Bush. He said Republicans should talk about the ‘lack of access to the American Dream.’ “
Rich man: “Pshaw. Put your shoulder to the boulder. Work harder.” Read more…