Archive

Author Archive

Class struggles in America (6 graphs)

July 28, 2016 3 comments

from David Ruccio

Almost five years ago, I suggested we start calling things by their correct names.

Take the working-class—people who are forced to have the freedom to sell their labor power for a wage. We refer to them as members of the middle-class (which needs to be “rebuilt“) and working families (who need to be helped) or, now as workers’ wages stagnate and the real value of the minimum wage declines, as the “feral underclass” (especially in theUK, in the aftermath of the riots) or the working-age poor (as in the recent AP report on the demographic composition of those living in poverty [ht: ja]).*

What’s the problem with calling it as it is? What are we afraid of? It’s the working-class, and its member are becoming increasingly impoverished. People who work for a living, or want a full-time job but can’t find one (whether or not they’re actively looking for one, since it’s getting increasingly difficult to find a decent job), represent nearly 3 out of 5 poor people. . .

So, from now on, in political and economic discourse, let’s call things by their correct names. The vast majority of people in the United States are members of the working-class. And they’re getting shafted.

Well, it seems, Americans are still struggling with the notion of the working-class (and of class more generally).

The best Donald Trump was able to come up with were “the great miners and steel workers of our country.” (Really? Trump wants to send American workers back into the mines and steel mills? Those jobs are mostly gone, and that’s a good thing.) Even Elizabeth Warren and Bernie Sanders weren’t able to refer to the working-class, preferring instead to use terms like “working people,” “hard-working families,” “workers,” and “working families”—although, in their case, when counterposed to corporate profits and CEOs, it was pretty clear they were referring to the growing class divide in the United States.

As Tamara Draut [ht: ja] explains, the American working-class is in fact changing.

Read more…

Children’s economics

July 27, 2016 3 comments

from David Ruccio

As I have argued many times on this blog, representations of the economy are produced and disseminated in many different spaces (in addition to academic economics departments) and through many different media (in addition to the usual, mostly mainstream economics textbooks).

One example of this proliferation of economic representations is children’s literature. Children are the targets of educators and writers, most of whom (at least these days) are determined to make sure children get the “correct” understanding of key concepts and institutions. And, for the most part, they mirror the kinds of knowledges produced by mainstream economists, albeit with language and illustrations appropriate for children.

Scholastic offers such a list (which features Homer Price by Robert McClosky, through which students learn the “law of demand”). So does Choice Literacy (which includes Tomie dePaola’s Charlie Needs a Cloak, “good for discussing the four factors of production”). And then there’s the Rutgers University Project on Economics and Children, which groups books by concept (such as Markets and Competition, Opportunity Cost, and so on).

Motoko Rich’s view is that “By and large, the economic lessons in children’s books lean left of center” (and that may be true of books that teach the importance of sharing and gift-giving) but, at least for the books on the lists provided by economics educators these days, the tendency is much more mainstream, if not purely neoclassical.  Read more…

Flat or falling (5 charts)

from David Ruccio

flat

A new report from McKinsey & Company, “Poorer than Their Parents? Flat or Falling Incomes in Advanced Countries” (pdf), confirms many people’s worst fears. As it turns out, the trend in stagnating or declining incomes for most workers (including the middle-class) is not confined to the United States, but is a global phenomenon.

Brexit and Trump are just the tip of the iceberg. Because of flat or falling incomes, many workers across the rich countries are angry and want change.

According to the authors of the report, as much as 70 percent of the households in 25 advanced economies saw their incomes drop in the past decade. That compares to just 2 percent of households that saw declining incomes in the previous 12 years.*

Read more…

Average incomes in the US 1979-2015

from David Ruccio

average

This is my own chart—showing the dramatic changes in the average incomes of the bottom 90 percent, the top 10 percent, and the top 1 percent—from the World Wealth and Income Database.

Incomes are in thousands of real 2015 dollars. Thus, for example, the average income of the bottom 90 percent fell between 1979 and 2015 (from $34.6 thousand to $33.2 thousand), while the average income of the top 10 percent rose (from $149.1 thousand to $273.8 thousand) and that of the top 1 percent soared (from $370.2 thousand to over $1 million).

Other charts in this series can be found here, here, and here.

Emmanuel Saez, Thomas Piketty, and the rest of the team need to be credited for making their data available. Readers should feel free to use this chart and reproduce it as they wish. . .

Inequality and polarization in the United States

July 12, 2016 6 comments

from David Ruccio

fig5

The problem of the growing gap between the small group of haves and all other Americans is (as I noted a week ago) so bad even the International Monetary Fund is sounding the alarm.  Read more…

Mainstream economics and the public

from David Ruccio

Mainstream economics has clearly had a great fall.

Just two days ago, I argued that—after the crash of 2007-08 and, now, Brexit—mainstream economists have had “nothing to offer, either in terms of insight or a path moving forward.” Also recently, Antonio Callari challenged Brad DeLong’s attempt to reduce economics to the mainstream debate between supply-siders and demand-siders and his argument that there’s no room for economists as public intellectuals.

Now, Mark Thoma has stepped forward to explain why it is that “in recent years the public has lost faith the in the economics profession.” And since by the “economics profession” Thoma is essentially referring to mainstream economists, he’s absolutely correct.

One reason for the lack of faith is the failure to predict the Great Recession, but the public’s dismissal of macroeconomists is based upon more than the failure to foresee the dangers the housing bubble posed for the economy. It is also due to false promises about the benefits to the working class from globalization, tax cuts for the wealthy, and trade agreements – promises that were often used to support ideological and political goals or to serve special interests.  Read more…

When success becomes failure

June 27, 2016 5 comments

from David Ruccio

fredgraph

The U.S. economy is a remarkable success according to the standards of neoclassical economic theory. Yet, for “prime-age” men, who need to work to provide for themselves and their families, it is increasingly a failure.   Read more…

Corrupt this!

June 24, 2016 2 comments

from David Ruccio

I know all about how corrupt a city can by. I live in Chicago, the “Capital of Corruption.”

And I hear all the time about all those other corrupt cities, most of them located in countries in Latin America, Africa, and Asia, which often fall low in the corruption perceptions indices like the one produced by Transparency International.

But for all the talk about transparency and the need to tackle corruption at the 2016 Anti-Corruption Summit in London, the host country itself may be the most corrupt in the world.

As Joel Benjamin [ht: ja] explains, the indices produced and disseminated by groups like Transparency International “only measure perceived corruption based upon the abuse of public office for private gain, i.e. the payment of bribes.” What they don’t account for is the fact that “While nepotism and subservience to finance capital is rife in Britain and its overseas dependencies, it is not illegal.”

At least Chicago’s corruption is transparent. Donate to the mayor’s campaign chest and you get a city contract or assistance with a development project. In the city of London (and other such financial centers in Britain, the United States, and Western Europe), corruption is based on money laundering and financial secrecy.   Read more…

Economists as public intellectuals

June 22, 2016 6 comments

from David Ruccio

Soon after I read Brad DeLong’s post on “The Economist as…?: The Public Square and Economists,” I contacted my long-time friend and collaborator Antonio Callari, who is the Sigmund M. and Mary B. Hyman Professor of Economics at Franklin and Marshall College and an authority on the history of economics. I am pleased to publish his guest post here.

  1. If you read Brad DeLong’s reflections on the role of economists in the public square you would be justified in reaching two overriding conclusions. The first is that the “great divide” in the practical and analytical economics of our times is between austerity-imposing Say’s Law theorists on one side and fiscal-stimulus Keynesians on the other. No sign here of a different type of divide—between those who assume the current institutional framework of capitalism and those who would use economic theory (e.g., the general framework of under-consumption as a tendency of capitalism) ) to question this framework and argue that the economic problems of our times require structural reforms foremost. No Marx, no Kalecki—not even a Schumpeter here—just Say and Keynes. But just Say and Keynes seems a rather inadequate couple today, when politics in both Europe and the United States (the very heart of the “market” economy with which DeLong identifies “economics”) has made clear that structural imbalances and inequalities are the heart of the matter.

Read more…

Bachaqueros and the distinction between productive and unproductive labor

June 13, 2016 6 comments

from David Ruccio

Every economic theory includes—or, at least, is haunted by—the distinction between productive and unproductive labor. The distinction serves as the basis of all their major claims, from the most basic theory of value to the conception of who deserves what within capitalism.

The distinction began with the French Physiocrats, especially François Quesnay, who in his 1758 Tableau Économique made a distinction between the “Productive” Class (which consisted of agricultural producers) and two other groups: the “Proprietary” class (which consisted of only landowners) and the “Sterile” class (which was made up of artisans and merchants). The idea was that all new value was created only by agricultural producers, not by industry or commerce.

It was then picked up by Adam Smith, who criticized the Physiocrats for overlooking the important contribution of manufacturing to the wealth of nations. While Smith broadened the concept of productive labor (to include both agriculture and industry), he retained the notion of unproductive labor (especially the “menial servants” he worried industrial capitalists would waste their profits on, thus undermining their “historic mission” to accumulate capital).

Karl Marx, in his critique of Smith, took over the distinction between productive and unproductive labor but then transformed it. For him, labor was productive to the extent that it produced surplus-value; all other labor (e.g., the labor of corporate managers as well as that of personal servants) was considered unproductive labor.*

Neoclassical economists, for their part, sought to abolish the distinction between productive and unproductive labor, based on the idea that any labor (when combined with physical capital and land) that contributes to a nation’s wealth should be considered productive.** Read more…

Home economics

June 1, 2016 1 comment

from David Ruccio

According to a new report from the Pew Research Center, in 2014, for the first time in more than 130 years, adults aged 18 to 34 were more likely to be living in their parents’ home than they were to be living with a spouse or partner in their own household or in any other living arrangement.

Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other. This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents.

By 2014, 31.6% of young adults were living with a spouse or partner in their own household, below the share living in the home of their parent(s) (32.1%). Some 14% of young adults were heading up a household in which they lived alone, were a single parent or lived with one or more roommates. The remaining 22% lived in the home of another family member (such as a grandparent, in-law or sibling), a non-relative, or in group quarters (college dormitories fall into this category).

So, what’s going on? Read more…

Markets, power, and the distribution of income

from David Ruccio

Joseph Stiglitz usefully explains that there’s more than one theory of the distribution of income. One theory, he writes, focuses on competitive markets (according to which “factors of production” receive their marginal contributions to production, the “just deserts” of capitalism); the other, on power (“including the ability to exercise monopoly control or, in labor markets, to assert authority over workers”).

In the West in the post-World War II era, the liberal school of thought has dominated. Yet, as inequality has widened and concerns about it have grown, the competitive school, viewing individual returns in terms of marginal product, has become increasingly unable to explain how the economy works. So, today, the second school of thought is ascendant.

I think Stiglitz is right: with the obscene levels of inequality we’ve seen emerge over the course of the past four decades, the notion of “just deserts” is being called into question, thereby creating space for other theories of the distribution of income to be recognized.

The only major problem with Stiglitz’s account is he leaves out a third possibility, an approach that combines a focus on markets with power, that is, a class analysis of the distribution of income.  Read more…

Still too big to fail

from David Ruccio

Here we are in 2016, almost eight years after the financial crash that brought the world economy to it knees (and ruined countless homeowners and threw millions of people out of work), and nothing has been done to solve the problem of Too Big to Fail banks.

Concentration-chart-610x367

In fact, as everyone knows (and as Stephanie Fontana points out), those banks are now ever bigger and the financial sector even more concentrated.   Read more…

CEO-to-worker pay ratios in the US

May 21, 2016 1 comment

from David Ruccio

CEO-worker

The United States’ top 500 chief executive officers managed to capture 335 times the average worker’s wage last year, taking home $12.4 million on average, according to a new report by the AFL-CIO. That average CEO pay was a whopping 819 times the wage of a worker earning the federal minimum wage.

Here’s the list of the top 25 CEOs by pay—from Joe Kiani of Massimo Corp (at more than $199 million) to Jeff Immelt of GE (at just under $33 million):

Read more…

Thought control in economics

from David Ruccio

No matter how many stories I tell them about thought control in economics, students and colleagues in other disciplines simply don’t believe me.

They don’t understand the restrictions on the professors who are hired in many economics departments, the narrow range of methods and perspectives published in the leading economics journals, the limits on economics research projects that actually receive funding, and even the strict surveillance of what can be taught to students in basic undergraduate and graduate economics classes. It’s beyond their imagination that mainstream economists do all they can—within their departments and in the wider discipline—to make sure other approaches (often referred to as heterodox economics and, often, noneconomics) are displaced to (and, in many cases, beyond) the margins.

So, it comes as no surprise to me—but it probably does to everyone outside of economics—that a senior lecture rat the University of Glasgow, Alberto Paloni [ht: sm], an expert in post-Keynesian theory, has been stopped from teaching a core degree module on macroeconomics.

This, after an essay in the Royal Economic Society newsletter specifically cited Paloni’s course as introducing a necessary pluralism into the teaching of economics:  Read more…

Class politics (Table of median voter income by US presidential candidate)

from David Ruccio

Richard Hofstadter was wrong. American politics has always been about class. And this presidential election is no different.

Don’t get me wrong: American politics has always been about a lot of things (from nativism and racism to foreign entanglements and so-called cultural issues). But Hofstadter’s argument that “American political life has rarely been touched by the most acute varieties of class conflict” is just plain wrong. American politics has also always been about class and class conflict—about the class dimensions of U.S. economy and society, both quantitative and qualitative—including the “most acute varieties,” if by that we mean open and transparent, as against hidden behind other issues and themes.

Already in this campaign, we’re getting another lesson in the class dimensions of American politics.   Read more…

Capitalism and “generation screwed” – USA data

April 29, 2016 10 comments

from David Ruccio

harvard4

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 55 comments

from David Ruccio

3050324-poster-p-1-this-pointless-machine-allows-anyone-to-work-for-minimum-wage

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

oxfam

Read more…

Follow

Get every new post delivered to your Inbox.

Join 14,128 other followers