“Don’t class warfare me”

from David Ruccio

Marketplace’s Kai Ryssdal is no class warrior. Far from it. But after Donald Trump’s chief economic adviser Larry Kudlow spent considerable time during a recent interview celebrating the latest statistics about economic growth, jobs, and wages and minimizing the effects of the trade tariffs, Ryssdal was encouraged to challenge him: 

Socialism or truth

from David Ruccio

The liberal establishment continues to mourn the death of truth. Everyone else is moving on.

Every day, it seems, one or another liberal—pundit, columnist, or scholar—issues a warning that, in the age of Donald Trump, we now live in a post-truth world. In their view, we face a fundamental choice: either return to a singular, capital-t truth or suffer the consequences of multiple sets of beliefs, facts, and truths.

For example, just the other day, Keith Kahn-Harris [ht: ja] (in the Guardian) noted the “sheer profusion of voices, the plurality of opinions, the cacophony of the controversy,” which in his view “are enough to make anyone doubt what they should believe.” It’s what he calls “denialism”: the transformation of the “private sickness” of self-deception into the “public dogma” of seeing the world in a whole new way.

There are multiple kinds of denialists: from those who are sceptical of all established knowledge, to those who challenge one type of knowledge; from those who actively contribute to the creation of denialist scholarship, to those who quietly consume it; from those who burn with certainty, to those who are privately sceptical about their scepticism. What they all have in common, I would argue, is a particular type of desire. This desire – for something not to be true – is the driver of denialism.

Utopia and mathematics

from David Ruccio

In a recent article, Dan Falk [ht: ja] identifies a fundamental problem in contemporary physics:

many physicists working today have been led astray by mathematics — seduced by equations that might be “beautiful” or “elegant” but which lack obvious connection to the real world.

What struck me is that, if you changed physics and physicists to economics and economists, you’d get the exact same article. And the same set of problems. 

Economists—especially mainstream economists but, truth be told, not a few heterodox economists—are obsessed with mathematics and formal modeling as the only correct methods for achieving capital-t truth. Mathematical modeling for them represents the best, most scientific way of producing, disseminating, and determining the veracity of economic knowledge—because it is logical, concise, precise, and elegant.* In that sense, mathematics represents what can only described as a utopia for the practice of modern economics.**

Mathematical utopianism in economics is based on elevating mathematics to the status of a special code or language. It is considered both a neutral language and, at the same time, a language uniquely capable of capturing the essence of reality. Thus, economists see mathematics as having both an underprivileged and overprivileged status vis-à-vis other languages.

Let me explain. 

“Another day older and deeper in debt”

from David Ruccio

Most Americans are not loading sixteens tons of coal. But they are, even in the midst of the recovery from the Second Great Depression, sinking deeper and deeper into debt.

According to a recent analysis by Reuters [ht: ja], the bottom 60 percent of income-earners have accounted for most of the rise in consumption spending over the past two years even as their finances have worsened.* The data show the rise in expenditures has outpaced before-tax income for the lower 40 percent of earners in the five years through mid-2017, while the middle 20 percent has just about stayed even. However, the upper 40 percent—especially the top fifth—has increased its financial cushion, deepening income inequality and leaving those at the bottom in an increasingly precarious financial position.** 

Disappearing poverty

from David Ruccio

In international human rights law, a “forced disappearance” occurs when a person is secretly abducted or imprisoned by a state or political organization (or by a third party with the authorization, support, or acquiescence of a state or political organization), followed by a refusal to acknowledge the person’s fate and whereabouts, with the intent of placing the victim outside the protection of the law.

The most infamous forced disappearances have occurred in Spain (during and after the Civil War), Chile (after the coup by General Pinochet in 1973), Argentina (during the so-called Dirty War from 1976 to 1983), and the United States (as part of the so-called War on Terror).

Now, Donald Trump’s Council of Economic Advisers (pdf) is attempting to carry out a forced disappearance of poverty.**

The aim of the Council’s report is to make the case for “expanding work requirements among non-disabled working-age adults in social welfare programs.”*** In order to do so, the authors of the report attempt to show that (1) there is a large pool of non-disabled  working-age adults who are currently beneficiaries of the three major non-cash welfare programs (Medicaid, food stamps or the Supplemental Nutrition Assistance Program, and housing assistance) who can and should be put to work, (2) independence or self-sufficiency is undermined by participation in government anti-poverty programs, and (3) government assistance to the poor has become outmoded because poverty itself has virtually disappeared in the United States. 

I ran out of words to describe how bad the recovery numbers are

from David Ruccio

Back in June, Neil Irwin wrote that he couldn’t find enough synonyms for “good” in an online thesaurus to describe the jobs numbers adequately.

I have the opposite problem. I’ve tried every word I could come up with—including “lopsided,” “highly skewed,” and “grotesquely unequal“—to describe how “bad” this recovery has been, especially for workers.

Maybe readers can come up with their own adjectives to illustrate the plight of Americans workers since the Second Great Depression began—something that captures the precipitous decline in the labor share during the past decade (from 103.3 in the first quarter of 2008 to 97.1 in the first quarter of 2018, with 2009 equal to 100).

But perhaps there’s a different approach. Just run the numbers and report the results. That’s what the Directorate for Employment, Labour, and Social Affairs seem to have done in compiling the latest OECD Employment Outlook 2018. Here’s their summary: 

“They aren’t laws of nature”

from David Ruccio

Nicola Headlam is, I think, right with respect to “how the rules of the economy are set”:

“Somehow, someone, somewhere made these rules up. They aren’t laws of nature.” And they determine “who’s got what and where and why”.

The question is, how do we teach economics so that that message gets through?

Aditya Chakrabortty [ht: ja] reports on one way of doing it—a makeshift classroom in a converted church, with nine “lay people” and two facilitators (Headlam and Anne Hines, who are donating their time), in the Levenshulme area of Manchester, England.

Part of what makes the course interesting, at least to me, are the participants:

Those doing the Levenshulme crash course don’t look like your typical seminar room attendees. Not only are they decades older; all but one is a women. The average undergraduate economics course, according to the Royal Economic Society, is about 67% male and 25% privately educated (compared with 7% of the population). After the class, a charity van pulls up outside, offering three bags of short-dated food for £6. Several “students” collect their groceries for the week.

Everyone here brings their own lived experience of economics. In her motorised wheelchair, Joanne Wilcock notes how “everything is much more expensive when you’re disabled”. Bang on, yet you hardly ever read that in an article on the latest inflation figures. Bhatt knows that Levenshulme is supposed to be gentrifying – “fancy cars, flash weddings” – but notices his neighbours can’t afford to do up their own houses. “All fur coat and no knickers!” he concludes, and the room cracks up.

Another is the pedagogy: 

Worker rights in the United States

from David Ruccio

Ambassador Nikki Haley’s decision last week to withdraw the United States from the United Nations Human Rights Councilis remarkable. The United States is the first nation in the body’s 12-year history to voluntarily remove itself from membership in the council while serving as a member.

Some have alleged that the timing of Haley’s decision is conspicuous. “The move,” read the second paragraph of a CNN report on Haley’s decision, “came down one day after the Office of the U.N. High Commissioner for Human Rights slammed the separation of children from their parents at the US-Mexico border as ‘unconscionable.’”

It’s true the Trump administration has been threatening to leave the Council for much of the past year. And the condemnation of the administration’s policy of separating children from their parents on the border was perhaps the last straw.

However, in my view, at least as important was a report last month by the Special Rapporteur on extreme poverty and human rights, Philip Alston, on his mission to the United States late last year.*

Alston’s critique of the economic situation in the United States could not be more pointed. 

Book this!

from David Ruccio

The premise and promise of the Republican tax cuts—officially, the Tax Cuts and Jobs Act—are that lower corporate taxes would lead to increased investment and thus more jobs and higher wages for American workers.

We all knew at the time that the logic was a sham. As I explained last August, one of the likely outcomes of the kind of corporate tax cuts Donald Trump and his fellow Republicans supported—and, as we saw, eventually rammed through—would be an increase in inequality. That’s because, since corporations aren’t facing any kind constraint in profits or their ability to borrow beyond their current profits, we likely wouldn’t see more investment, but instead some combination of more mergers and acquisitions, more payouts to shareholders, and more distributions of the surplus to CEOS.

More recently, I explained that inequality would also increase because corporations would likely use a portion of their higher profits to engage in stock buybacks, leading to an increase in stock prices. And stock ownership in the United States is already grotesquely unequal. Therefore, the rise in equity prices would disproportionately benefit the small group at the top of the wealth pyramid. And that’s exactly what is happening.

Utopia and work

from David Ruccio

The goal of mainstream economists is to get everybody to work. As a result, they celebrate capitalism for creating full employment—and worry that capitalism will falter if not enough people are working.

The utopian premise and promise of mainstream economic theory are that capitalism generates an efficient allocation of resources, including labor. Thus, underlying all mainstream economic models is a labor market characterized by full employment.

Thus, for example, in a typical mainstream macroeconomic model, an equilibrium wage rate in the the labor market (W_f, in the lower left quadrant) is characterized by full employment (the supply of and demand for labor are equal, at L_f), which in turn generates a level of full-employment output (Y_f, via the production function, in the lower right quadrant) and a corresponding level of prices (P₀, in the upper quadrants). If the money wage is flexible it is possible to ignore the top left quadrant, because, in that case, the equilibrium real wage, employment and output are W_f, L_f and Y_f, respectively, whatever the price level. With flexible money wages, the aggregate supply curve is independent of the price level and is represented by Y_FY_F.

Class struggle according to liberals

from David Ruccio

Liberals like to talk about all kinds of social ills and identity-laden tensions—but not class struggle. That’s their persistent and enduring blindspot.

Except, it seems, when it comes to Donald Trump. 

Utopia and technology

from David Ruccio

Forget Bitcoin. It’s the underlying technology, blockchain, that is generating the most excitement. Even utopia!

Bitcoin is a digital currency that was invented in 2009 by a person (or group) who called himself Satoshi Nakamoto. His stated goal was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.” After cultivating the concept and technology, in 2011, Nakamoto turned over the source code and domains to others in the bitcoin community, and subsequently vanished.

Unequal wealth of nations

from David Ruccio

The premise and promise of capitalism, going back to Adam Smith, have been that global wealth would increase and serve as a benefit to all of humanity.* But the experience of recent decades has challenged those claims: while global wealth has indeed grown, most of the increase has been captured by a small group at the top. The result is that an obscenely unequal distribution of the world’s wealth has become even more unequal—and, if business as usual continues, it will turn out to be even more grotesquely unequal in the decades ahead. 

Marx ratio

from David Ruccio

First there was the Great Gatsby curve. Then there was the Proust index. Now, thanks to Neil Irwin, we have the Marx ratio.

Each, in their different way, attempts to capture the ravages of contemporary capitalism. But the Marx ratio is a bit different. It was published in the New York Times. Its aim is to capture one of the underlying determinants of the obscene levels of inequality in the United States today—not class mobility or the number of years of national income growth lost to the global financial crash. And, of course, it takes its name from that ruthless nineteenth-century critic of mainstream economics and capitalism itself.

Now, to be clear, there are lots of ratios than can be found in Marx’s critique of political economy—for example, the rate of exploitation, the intensity of labor, the technical productivity of labor, the exchange-value per unit use-value, and the value rate of profit (as illustrated above in a fragment from one of my class handouts)—and the ratio Irwin presents is not one of them.

But that doesn’t make Irwin’s ratio wrong, or uninteresting. On the contrary. 

Poverty of anti-poverty (3 graphics)

from David Ruccio

The majority of government expenditures in the United States go towards social insurance and means-tested transfers.* And the good news is, they work.

According to recent report by Bruce D. Meyer and Derek Wu, Social Security cuts the poverty rate by a third—more than twice the combined effect of the five means-tested transfers. Among those transfers, the Earned-Income Tax Credit and food stamps (officially, the Supplemental Food Assistance Program) are most effective. All programs except for the tax credit sharply reduce deep poverty (below 50 percent of the poverty line), while the impact of the tax credit is more pronounced at 150 percent of the poverty line. For the elderly, Social Security single-handedly slashes poverty by 75 percent, more than 20 times the combined effect of the means-tested transfers.** Supplemental Security Income, Public Assistance, and housing assistance have the highest share of benefits going to the pre-transfer poor, while the tax credit has the lowest.***

And the bad news? 

Utopia and markets

from David Ruccio

Maarten Vanden Eynde, The Invisible Hand (2015)*

We hear it all the time. On a regular basis. Having to do with pretty much everything.

Why is the price of gasoline so high? Mainstream economists respond, “it’s the market.” Or if you think you deserve a pay raise, the answer again is, “go get another offer and we’ll see if you’re worth it according to ‘the market’.”

Capitalism doesn’t provide decent-paying jobs

from David Ruccio

The usual suspects have attacked Bernie Sanders’s proposal for the federal government to guarantee a job paying $15 an hour and health-care benefits to every American worker “who wants or needs one.” 

Utopia and economic development

from David Ruccio

From the very beginning, the area of mainstream economics devoted to Third World development has been imbued with a utopian impulse. The basic idea has been that traditional societies need to be transformed in order to pass through the various stages of growth and, if successful, they will eventually climb the ladder of progress and achieve modern economic and social development.

Perhaps the most famous theory of the stages of growth was elaborated by Walt Whitman Rostow in 1960, as an answer to the following questions: 

Their beautiful recovery

from David Ruccio

Does anyone really need any additional evidence of the lopsided nature of the current recovery? 

Inequality and fairness

from David Ruccio

While Amazon let it slip last week that its Prime program—the annual membership that offers discount pricing and free 2-day shipping—now tops 100 million members, there’s another number people might be curious about: the company’s average annual wage, which Amazon revealed in compliance with a new regulation that asks companies to show a comparison between an average worker’s wage and the salary of their CEO.