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We’re #1!

March 22, 2017 8 comments

from David Ruccio

wealth

According to calculations by Kenneth Thomas (based on data in the latest Credit Suisse Global Wealth Report), the United States has the most unequal distribution of wealth of any rich nation.   Read more…

Dual economies and the vanishing middle-class

March 21, 2017 3 comments

from David Ruccio

Both Peter Temin and I are concerned about the vanishing middle-class and the desperate plight of most American workers. We even use similar statistics, such as the growing gap between productivity and workers’ wages and the share of income captured by the top 1 percent.

productivity  Read more…

USA life expectancy vs. health expenditure 1970-2014 compared to other OECD nations

March 18, 2017 2 comments

from David Ruccio

ftotHealthExp_pC_USD_long-2

It is likely, if some version of Trump/Ryancare is approved in the United States, millions more people will not be able to purchase the insurance necessary to receive adequate healthcare.   Read more…

Tale of two depressions

March 15, 2017 3 comments

from David Ruccio

Men Waiting Outside Al Capone Soup Kitchen JNS.FoodGiveaway2

One of the courses I’m offering this semester is A Tale of Two Depressions, cotaught with one of my colleagues, Ben Giamo, from American Studies. It’s a comparison of the conditions and consequences of the two major crises of capitalism during the past hundred years, the 1930s and the period after the crash of 2007-08.*

It just so happens the Guardian is also right now revisiting the 1930s. Readers will find lots of interesting material, from some evocative street photography from the period (including bread lines, hunger marches, and various protests) to classics of political theater (from Bertolt Brecht and Federico García Lorca to John Dos Passos and Clifford Odets).

I’ve been writing about the Second Great Depression, in mostly economic terms, since 2010. For the Guardian, the idea is that the situation then, in the 1930s, offers lessons for us today—partly for economic reasons but, increasingly, given the victory of Donald Trump and the growth of other right-wing populist-nationalist movements in Europe, in political terms.  Read more…

Changing the story to hide the problem

March 13, 2017 5 comments

from David Ruccio

wage share

It’s obvious to anyone who looks at the numbers that the wage share of national income is historically low. And it’s been falling for decades now, since 1970.

Before that, during the short Golden Age of U.S. capitalism, the presumption was that the share of national income going to labor was and would remain relatively stable, hovering around 50 percent. But then it started to fall, and now (as of 2015) stands at 43 percent.

Read more…

New geography, old inequality

March 12, 2017 6 comments

from David Ruccio

fredgraph (2)

It’s true (as I have argued many times on this blog), the number of U.S. manufacturing jobs has been declining for decades now—and they’re not coming back. Instead, they’ve been replaced (as is clear in the chart above) by service-sector jobs.   Read more…

Hammer time

March 10, 2017 7 comments

from David Ruccio

687474703a2f2f692e696d6775722e636f6d2f6163484d3330786c2e6a7067

Millions of workers have been displaced by robots. Or, if they have managed to keep their jobs, they’re being deskilled and transformed into appendages of automated machines. We also know that millions more workers and their jobs are threatened by much-anticipated future waves of robotics and other forms of automation.

But mainstream economists don’t want us to touch those robots. Just ask Larry Summers.

Summers is particularly incensed by Bill Gates’s suggestion that we begin taxing robots. So, he trots out all the usual arguments, hoping that at least one of them will stick. It’s hard to distinguish between robots and other forms of automation. Robots and other forms of automation produce better goods and services. And, of course, automation enhances productivity and leads to more wealth. So, we shouldn’t do anything to shrink the size of the economic pie.   Read more…

Trumponomist

March 7, 2017 6 comments

from David Ruccio

james-glassman-and-kevin-hassetts-1999-book-dow-36000-predicted-that-the-dow-jones-stock-index-would-more-than-triple-in-the-years-ahead-even-now-16-years-later-the-index-is-only-just-halfway-to-36000

 

According to recent news reports, Kevin Hassett, the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (no, I didn’t make that up), will soon be named the head of Donald Trump’s Council of Economic Advisers.

Yes, that Kevin Hassett, the one who in 1999 predicted the Down Jones Industrial Average would rise to 36,000 within a few years.

060214pollock2 Read more…

Look, Ma, no competition

March 5, 2017 2 comments

from David Ruccio

fig1

It comes as no surprise, at least to most of us, that corporations are getting larger and increasing their share in many different industries. We see it everyday—when we buy plane tickets or try to take out a loan or just make a purchase at a retail store.   Read more…

Populism and mainstream economics

March 3, 2017 7 comments

from David Ruccio

There doesn’t seem to be anything remarkable about mainstream economists’ rejection of the new populism.

Lest we forget, mainstream economists in the United States and Europe (and, of course, around the world) mostly celebrated current economic arrangements. As far as they were concerned, everyone benefits from contemporary globalization (the more trade the better) and from the distribution of income created by market forces (since everyone gets what they deserve).

To be sure, those who identify with different wings of mainstream economics debate the extent to which there are market imperfections and therefore how much interference there should be in markets. Conservative mainstream economists tend to argue in favor of less regulation, their liberal counterparts for more government intervention. But they share the same general economic vision—that capitalism is characterized by “just deserts,” stable growth, and rising standards of living.

Except of course in recent decades it hasn’t. Not by a long shot.

Inequality has skyrocketed to obscene levels (and continues to rise), leaving many people behind. The crash of 2007-08 shattered the illusion of stability—and now there’s a deepening worry of “secular stagnation” moving forward. And, while the conspicuous consumption of the tiny group at the top continues unabated, only rising debt keeps everyone else from falling down the ladder.

No wonder, then, that economic populists, especially those on the Right, are rejecting the status quo—and winning campaigns and elections (often in the form of protest votes).

For the most part, to judge by Brigitte Granville’s survey of a variety of Project Syndicate commentators’ responses to populism, mainstream economists remain blind as to “why so many voters have embraced facile policies and populist politics.”   Read more…

Looking for work in all the wrong places

March 2, 2017 5 comments

from David Ruccio

outsourcing

Donald Trump promised to bring back “good” manufacturing jobs to American workers. So did Hillary Clinton.

Both, as I argued back in December, were wrong.   Read more…

Why human capital is not capital

March 1, 2017 4 comments

from David Ruccio

Noah Smith is right about one thing: mainstream economists tend to use the word “capital” pretty loosely.

It just means “anything you can spend resources to build, which lasts a long time, and which also can be used to produce value.” That’s really broad. For example, it could include society itself. It also typically includes “human capital,” which refers to people’s skills, talents, and knowledge.

humptydumptymasterBut then Smith proceeds, like the neoclassical equivalent of Humpty Dumpty, to make his definition of human capital the master—because, in his view, “it helps to convey some important truths about the world.”

Human capital, as I’ve explained in some detail before, is a profoundly misleading concept.

I don’t want to repeat those arguments here. But I do want to make two additional points.

First, if Smith wants to invoke human capital to say “education and skills are a form of wealth,” then why not include other ways people are able to earn more or less than their counterparts? Why not, for example, go beyond his reference to credentials (he has a Stanford degree) and intellectual abilities (apparently, he can do math well and write well) and refer to some of the other important ways people are sorted out within existing economic relations. I’m thinking of such things as gender, race and ethnicity, immigration status, and so on. They’re all ways workers are able to receive more or less income that have nothing to do with the effort they put into their jobs. Does Smith want to argue that masculinity, whiteness, and native birth are forms of human capital?   Read more…

“In this interregnum morbid phenomena of the most varied kind come to pass”

February 25, 2017 7 comments

from David Ruccio

chart2

In his Prison Notebooks, Antonio Gramsci wrote: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum morbid phenomena of the most varied kind come to pass.”*

The world is once again living an interregnum. It is poised between the failed economic model of recovery from the crash of 2007-08 and the birth of a new model, one that would actually work for the majority of Americans.**

Morbid symptoms abound, including slow economic growth, persistent poverty, and obscene levels of inequality. Perhaps even more significant, especially at this point in the so-called recovery, when according to mainstream economists and policymakers full employment has been achieved, workers’ wages are actually declining.   Read more…

How to turn a recession into a depression

February 23, 2017 14 comments

from David Ruccio

eurozone-greece-poverty

Greece is a perfect example of how to turn a bad economic situation into something even worse. As Reuters reports,  Read more…

Chasing the American Dream into a deadend

February 19, 2017 6 comments

from David Ruccio

debt

The latest Quarterly Report on Household Debt and Credit (pdf) from the New York Fed’s Center for Microeconomic Data showed a substantial increase in aggregate household debt balances in the fourth quarter of 2016 and for the year as a whole. As of 31 December 2016, total household debt stood at $12.58 trillion, an increase of $226 billion (or 1.8 percent) from the third quarter of 2016. Total household debt is now just 0.8 percent ($99 billion) below its third quarter 2008 peak of $12.68 trillion, and 12.8 percent above the second quarter 2013 trough.   Read more…

Make GDP great again

February 17, 2017 9 comments

from David Ruccio

Mainstream economics presents quite a spectacle these days. It has no real theory of the firm and, even now, more than nine years after the Great Recession began, its most cherished claim to relevance—the use of large-scale forecasting models of the economy that assume people always behave rationally—is still misleading policymakers.

As if that weren’t embarrassing enough, we now have a leading mainstream economist, Havard’s Martin Feldstein, claiming that the “official data on real growth substantially underestimates the rate of growth.”

Mr. Feldstein likes to illustrate his argument about G.D.P. by referring to the widespread use of statins, the cholesterol drugs that have reduced deaths from heart attacks. Between 2000 and 2007, he noted, the death rate from heart disease among those over 65 fell by one-third.

“This was a remarkable contribution to the public’s well-being over a relatively short number of years, and yet this part of the contribution of the new product is not reflected in real output or real growth of G.D.P.,” he said. He estimates — without hard evidence, he is careful to point out — that growth is understated by 2 percent or more a year.

This is not just a technical issue for Feldstein:  Read more…

Economists as plumbers?

February 15, 2017 3 comments

from David Ruccio

Apparently, the latest attempt to redefine the role of economists is to encourage them to be plumbers.

Maybe it’s just my age but, when I read plumbers, I immediately think of the covert Special Investigations Unit in the Nixon White House—the operation that began with attempting to stop the leak of classified information (such as the Pentagon Papers) and then branched into illegal activities while working for the Committee to Re-elect the President (including the Watergate break-in).

I don’t think that’s what MIT economist Esther Duflo (pdf) had in mind when, in her Ely Lecture to the American Economic Association meeting last month, she suggested that economists seriously engage with plumbing, “in the interest of both society and our discipline.”

As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter.

I’ll admit, I have a lot of respect for plumbers (especially when they’re able to fix the mess I’ve made trying to repair an existing fixture or install a new one). And I do think anyone involved in designing new policies and regulations should learn more about how they are actually implemented.  Read more…

Once again on the theory of the firm

February 12, 2017 23 comments

from David Ruccio

It is extraordinary that the hegemonic economic theory in the world today—neoclassical economics—still lacks an adequate theory of the firm.

It beggars belief both because neoclassical economics is the predominant theory that is taught to hundreds of thousands of students every year and used to make sense of the world and formulate policy in countless think thanks and government agencies and because the firm (or enterprise or corporation) is one of the central institutions of capitalism. It’s where many (but of course not all) goods and services are produced, value and surplus-value are created, and profits generated for capitalists.

And yet the neoclassical notion of the firm, even when developed by Nobel Prize-winning economists (such as Oliver Hart and Bengt Holmstrom), is not much more than an empty box—without any real history and, as it turns out, without any links to politics.

Daniel Carpenter, the Allie S. Freed Professor of Government in the Faculty of Arts and Sciences and Director of Social Sciences at the Radcliffe Institute for Advanced Study at Harvard University, certainly thinks that’s a problem in terms of making sense of how firms came to be constituted historically and what their effects are on contemporary society.   Read more…

What about that pie?

February 10, 2017 4 comments

from David Ruccio

pie

The U.S. economic pie couldn’t be carved up much more unequally. The top 10 percent manages to capture about 47 percent of total pre-tax income, while the bottom 90 gets the rest. The top 1 percent alone walks away with 20 percent of national income.   Read more…

Scarce workers?

February 7, 2017 1 comment

from David Ruccio

fredgraph

Readers know the old adage: in this world nothing can be said to be certain, except death and taxes.

And, we should add, employers complaining they can’t find enough good workers.

The fact is, if workers were really scarce, their wages would be rising dramatically. That’s how things works in a capitalist labor market: employers who want to hire workers offer higher wages.

But, according to the latest report from the Bureau of Labor Statistics, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.84—and weekly earnings by $1.34. That’s an annual rate of just 2.1 percent, the same as the rate of inflation.  Read more…