Author Archive

Capitalism and “generation screwed” – USA data

April 29, 2016 9 comments

from David Ruccio


We already knew that Millenials are “generation screwed.” Now we know, thanks to the latest Harvard Public Opinion Project survey, that the majority (51 percent) does not support capitalism—and even fewer (just 19 percent) identify as capitalists.*

Read more…

Minimum-wage machine

April 26, 2016 19 comments

from David Ruccio


Here’s a description of the minimum-wage machine [ht: sm]:

This machine allows anyone to work for minimum wage for as long as they like. Turning the crank on the side releases one penny every 4.97 seconds, for a total of $7.25 per hour. This corresponds to minimum wage for a person in New York. This piece is brilliant on multiple levels, particularly as social commentary. Without a doubt, most people who started operating the machine for fun would quickly grow disheartened and stop when realizing just how little they’re earning by turning this mindless crank. A person would then conceivably realize that this is what nearly two million people in the United States do every day…at much harder jobs than turning a crank. This turns the piece into a simple, yet effective argument for raising the minimum wage.

The machine can also be reprogrammed to pay the minimum wage of wherever it happens to be currently exhibited.

Ghost banks

April 24, 2016 3 comments

from David Ruccio

It’s been more than seven years and yet we’re still haunted by the spectacular crash that took place on Wall Street.

The big banks have been fined but no one, at least at or near the top, has been prosecuted let alone gone to jail.

The question is, why?

We know why the Eric Holder and the Justice Department didn’t go after the top executives: they were afraid of undermining the fragile recovery.

What about the Securities and Exchange Commission (which, remember, was set up during the first Great Depression to stem the fraud and abuses on Wall Street)?

We now know, thanks to Jesse Eisinger (based on a treasure-trove of internal documents and emails released by James A. Kidney, a now-retired SEC lawyer) that in the summer of 2009 lawyers at the SEC were preparing to bring charges against senior executives at Goldman Sachs (over a deal known as Abacus) but they never took the case to trial.

Read more…

Breaks and broken

from David Ruccio


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Theory of the firm

April 16, 2016 7 comments

from David Ruccio

The problems surrounding the central institution of capitalism—the corporation—are so widespread and enormous they’ve even provoked concern in sympathetic quarters, such as the Harvard Business School.

This past November, Harvard hosted a conference during which participants attempted to grapple with the tensions between Milton Friedman’s theory of the firm—according to which firms can and should only benefit society by focusing on maximizing shareholder value—and the growing political influence of corporations after Citizens United—when it has become increasingly easy for firms to tweak the rules of the game in their favor.

Now, for the rest of us—citizens, nonmainstream economists, and academics in disciplines outside of business and economics—both the history of corporations and the prevailing neoclassical theory of the firm present so many problems it’s hard to believe Friedman’s ideas are still taken seriously. Long before Citizens United, corporations have exercised a great deal of influence both inside (over their workers) and outside (in politics and in the wider society). That’s why the corporation has been a contested institution—legally, economically, politically—since its inception. Similarly, the neoclassical theory of the firm (initially in its “black box” form, then when the owner-manager agency problem was raised) has swept most of the serious problems under the theoretical rug.*

But for the scholars gathered at Harvard, the key issue (as presented in the brief paper coauthored by Harvard Business School faculty members Paul Healy, Rebecca Henderson, David Moss, and Karthik Ramanna [pdf]) was a relatively narrow one:  Read more…

“Capitalism is the legitimate racket of the ruling class”

April 14, 2016 10 comments

from David Ruccio

No, that’s not the democratic socialist candidate for the Democratic nomination. It was actually Al Capone who once said that “Capitalism is the legitimate racket of the ruling class.”*

That racket—and, with it, challenges to the legitimacy of capitalism—was evident in a wide variety of news stories yesterday.

life span

First, there was the issue of health. Once again, we’re learning that the capitalist racket is affecting health. In particular, the gap in life span between rich and poor is widening. The top 1 percent among American men live 15 years longer than the poorest 1 percent; for women, the gap is 10 years. These rich men and women have gained three years of longevity just in this century.   Read more…

Out of the shadows

April 11, 2016 2 comments

from David Ruccio

The latest bank to admit criminal fraud is Wells-Fargo. The largest U.S. mortgage lender and third-largest U.S. bank by assets, Wells-Fargo deceived the U.S. government into insuring thousands of risky mortgages, and formally reached a record $1.2 billion settlement of a U.S. Department of Justice lawsuit. Several lenders, including Bank of America Corp, Citigroup Inc, Deutsche Bank AG, and JPMorgan Chase & Co, previously settled similar federal lawsuits.

To read Paul Krugman (who’s “been doing a lot of shovel work for the Hillary Clinton campaign lately”), the real problem in the run-up to the spectacular crash of 2007-08 was not Too Big to Fail banks like Wells-Fargo, but the so-called shadow-banking system. But, as Matt Taibi [ht: db] explains, “Krugman is just wrong about this.”

The root problem of the ’08 crisis lay in a broad criminal fraud scheme in the mortgage markets. Real-estate agents fanned out into middle- and low-income neighborhoods in huge numbers and coaxed as many people as possible into loans, whether they could afford them or not.

Those loans in turn were bought up by giant financial companies on Wall Street, who chopped them up into a kind of mortgage hamburger. Out of this hamburger, they made securities. These securities were then sold to institutional investors like pension funds, unions, insurance companies and hedge funds.

Read more…

US corporate income taxes 1934-2015

from David Ruccio

Corporate income taxes represent a small percentage of total federal tax revenue (at 11 percent) and they’ve been declining for a long time (since the 1940s).


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Inequality and human rights

April 5, 2016 4 comments

from David Ruccio

We all know that economic inequality has reached grotesque, even obscene, levels around the world. And the gap between a tiny group at the top and everyone else continues to grow.

But is inequality a human rights concern?

As Ignacio Saiz and Gaby Oré Aguilar [ht: ms] explain, the ongoing debates about inequality

have rarely made reference to human rights. In turn, the human rights community has paid very little attention to economic inequality. While inequality on grounds such as gender, race and disability have long been core human rights concerns, gross inequalities in economic status remain largely unchallenged by human rights law and advocacy.

The question then is, is it possible or even desirable to make inequality a central concern of the global human-rights movement?  Read more…

Generation screwed—and working-class

from David Ruccio


We all know that the Millennials, notwithstanding their constant battering in the media, are generation screwed.

Read more…

Yea, they’re angry! (7 graphs)

March 19, 2016 10 comments

from David Ruccio  81_176523-1

Yes, American workers are angry. But not just for one reason—for many reasons.

It took a long time for U.S. political and economic elites (and their friends in economics) to understand that the American working-class has been squeezed far beyond what it can take. Even now, it’s not clear they understand, although the campaigns of Donald Trump and Bernie Sanders have given clear indications that the establishment is out of touch.

Even then, the anxieties and frustrations of U.S. workers can’t be put down to one thing.   Read more…

Birth, sex, death—or inequality

from David Ruccio


In Brazil and around the world, sensationalist front-page headlines have focused on the links between the Zika virus and microcephaly, sexual transmission, and the coming pandemic.

Or, as Wilson Roberto Vieira Ferreira explains, the media have once again manipulated the themes of birth, sex, and death—”the most striking (and socially disciplined) features of human existence.” Read more…

“For years I thought what was good for our country was good for General Motors, and vice versa”

March 16, 2016 2 comments

from David Ruccio

That was Charles Wilson, the president of General Motors, during a Congressional hearing in 1953. Wilson had been asked whether there was any conflict between his job and becoming Secretary of Defense. His answer has since been shortened to “As goes GM, so goes America.”

In any case, GM is a perfect example of the argument I made the other day about capitalism and international trade.

The existence of low wages for American workers is both a condition and consequence of these trade agreements. It’s a condition to the extent that, with stagnant wages and slowly growing consumption, U.S. businesses often look abroad to sell the commodities they produce. And it’s a consequence in the sense that cheap imports and corporate decisions to relocate production abroad negatively affect the wages and working conditions of American workers.

So, there’s a real problem with international trade, which workers in Michigan and elsewhere have every right to be concerned about.

But the problem is not just with trade. It’s capitalism, too. Or, to put it differently, it’s capitalist trade that’s the problem.

That’s because capitalism means that capitalists get to appropriate the surplus and do with it what they want. They get to decide when and where commodities will be produced, and therefore when and where jobs will or will not be created. If that means offshoring production or purchasing inputs from producers in other countries in order to boost profits, they’ll do so. And workers in the United States will either lose their jobs or be forced to accept lower wages and fewer benefits in order to “compete” with the production of commodities elsewhere.

Read more…

Crisis? What crisis?*

March 12, 2016 4 comments

from David Ruccio

We’re more than seven years out from the most severe economic crash since the First Great Depression and nothing much on Wall Street has changed.


As everyone knows, the Too Big To Fail banks that got us into the current mess are now Too Bigger to Fail. The top five U.S. banks had approximately 30 percent of U.S. banking assets in 1998; this rose to 45 percent by 2008 and to more than 47 percent in 2013 (the last year for which data are available).  Read more…

How the reserve army works

March 10, 2016 2 comments

David Ruccio

casselman-marchjobs2016-1 casselman-marchjobs2016-3

The new jobs report is out and, pretty much as expected, a bunch of new jobs (242,000, to be exact) were created in February and the official unemployment rate remained the same (at 4.9 percent). But workers’ wages actually declined.

What’s going on?

Read more…

Generation screwed

March 8, 2016 7 comments

from David Ruccio


Millennials—those born between 1980 and the end of 1994—regularly take a beating in the media. They’re accused of being lazy, self-absorbed, politically apathetic narcissists, who aren’t able to function without a smartphone and who live in a state of perpetual adolescence, incapable of commitment.

The members of Generation Y also hold a much more favorable view of socialism than any other generation (according to this YouGov [pdf] poll).*

What’s going on?

Read more…

Take the test

March 5, 2016 1 comment

from David Ruccio


Do you want to know where your income places you in the distribution of income in the United States?

Go here and take the test.

Notes: Yes, that’s right, $27,000 a year places you at the 50th percentile (of all Americans ages 16 and over who reported personal income greater than $0 in 2014). And, remember, it’s individual, not household, income that you should put into the corresponding box.

Economic propaganda—not education

from David Ruccio

There’s no doubt, after the crash of 2007-08, students—including those in middle schools—could use more economics education.

Unfortunately, they’re not getting it. They’re just being exposed to propaganda.

“What is the basic economic problem all societies face?” April Higgins asks her sixth-grade class.

Ava Watson, raises her hand: “Scarcity.”

The teacher asks for a definition and the class responds, in unison: “People have unlimited wants but limited resources.”

Not bad for a bunch of sixth-graders.

What April Higgins is engaged in is not economics education. It’s just neoclassical economics.

Read more…

Money and the myth of barter

from David Ruccio


In the beginning, there was barter. Then, and forever after, there was money

That’s the myth every student of economics learns, that money grows out of barter. The idea is that monetary exchange solves the problem of the double coincidence of wants—that a person who is interested in trading needs to find someone who wants what they have and has what they want. Money makes trade much easier, so the story goes, and thus becomes a remarkable example of both human ingenuity and economic progress.

The fact is, as Ilana E. Strauss [ht: ja] explains, the story is false. Human beings did not invent money to solve the difficulties of barter exchange. Barter turns out to be a historical myth. Read more…

Looking below the surface

March 1, 2016 7 comments

from David Ruccio


Mark Tansey, “The Myth of Depth” (1984)

The original title of this post was, “What do liberal economists want?”

So, what is it they want? According to their public pronouncements, not a whole helluva lot.

The liberal mainstream economists who have been attacking Bernie Sanders’s proposals and Gerald Friedman’s analysis of those proposals have acknowledged they actually support some of Sanders’s proposals.

Read more…


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