Income inequality rising and permanent over past two decades

[All Along The Watchtower]

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http://www.brookings.edu/about/projects/bpea/latest-conference/2013-spring-permanent-inequality-panousi

[H.E. VOLODYMYR ZELENKSYY]

Goddamn neoliberals.

[opebo]

Goddamn neoliberals.

Should all be boiled in their own oil.  Guillotining is too good for them.

[k-onmmunist]

the year that living standards peaked in britain was 1976 and the year wages began to end a 160 year trend of rising was in 1980. meanwhile, working hours have remained at around 8 hours since the 1930s despite massive increases in automation and productivity since then. it's blindingly obvious we're being cheated.

[King]

I had an epiphany on economics this morning.  A very moderate hero one, but one I am almost certain is right.

The conservatives are correct in the sense that Keynesian deficit spending does not create a good long term outlook for the economy though it does provide short term fixes.  A large government does eventually lead into inflation that prevents the economy from growing further, as we saw in the late 1970s.  There will eventually become too much crowding out in the GDP by the feds, leaving a very impoverished private sector.  A small government with a balanced budget amendment and management of recessions through the Federal Reserve and monetary policy would be a superior way of maintaining prosperity and preventing long recessions.

However, it would only work if that small government were run by liberal Democrats, because the Republicans are too married to corporatism and the military industrial complex, which distorts their otherwise correct ideals.  Even those who aren't, such libertarians, still have far too little respect for antipoverty initiatives.  Supply-side economics and monetarism to reduce inflation do create more rapid growth than Keynesianism, but also create potential for a large wealth gap, which will eventually destroy demand to the point where no supply can sustain it, hence our Great Recession.

A relatively small government could fix this through a progressive tax and spending most if not all of its budget on ensuring the poor and lower middle class do not get left behind.  However, the government which Republicans wish to build would not achieve this, but instead take money equally from all classes and spend it in corporate welfare projects and military dead weight.  This is why there was still difficulty emerging from recessions under Reaganomics and after Clinton balanced the budgets; and why Greenspan's attempts in 2001 to stop the recession with monetary policy did not work.  The government which exists under these ideologies is effectively useless, preventing monetary solutions from being effective.

Demand side economics of the left eventually leads to a supply depression, and the supply side economics of the right eventually leads to a demand depression.   Therefore, the solution to maintaining infinite economic prosperity is to combine the two:  a system which taxes and inflation are targeted to be kept as low as possible and no debt is accumulated, to stimulate supply, but as much of the tax money collected as possible is used on a true welfare state rather than defense or other investment, to ensure the bottom does not fall out.  

[k-onmmunist]

while inflation is obviously not particularly desirable, i think there's too much of an emphasis on anti-inflationary policy at the price of growth. if you read ha-joon chang, he argues that even many free market economists believe growth isn't correlated with inflation until inflation hits 10%+, and some go as far as 30%. brazil in the 1960s and 1970s was one of the fastest growing economies in the world and yet it had over 40% inflation much of the time.

however, if you want to knock stagflation on the head, the best option to me seems to be to cut working hours and thus create price + wage cuts, which hits inflation while also freeing up labour hours to be filled by other workers. this process hasn't happened in the last 80 years, despite many key figures having predicted we'd be working a 20 hour workweek by 2000.

obviously i'd combine this with a program of nationalization, but that's me. there's a potential solution to stagflation within a keynesian framework, even if i'd go much further.

[minionofmidas]

Yes. Yes that is the case.

[TNF]

Reaganomics at work.

[Filuwaúrdjan]

'We aren't winning anymore'

'Yeah, we know'

Not sure if it's exact (actually I'm sure it isn't), but, anyway, one of the more memorable exchanges (other than the obvious ones) in Boys from the Blackstuff.

[Torie]

I agree that income inequality is rising, and destined over time to get worse rather than better due to trends in the global economy and technology, and in the US, due to the sad state of our educational system for those in the downmarket zip codes in general.

[Grumpier Than Uncle Joe]

I agree that income inequality is rising, and destined over time to get worse rather than better due to trends in the global economy and technology, and in the US, due to the sad state of our educational system for those in the downmarket zip codes in general.

Is this the new upmarket zip code lingo for black and brown neighborhoods?

[opebo]

I agree that income inequality is rising, and destined over time to get worse rather than better due to trends in the global economy and technology.

The underlined is State policy, Torie, not some kind of natural disaster.

[Torie]

I agree that income inequality is rising, and destined over time to get worse rather than better due to trends in the global economy and technology, and in the US, due to the sad state of our educational system for those in the downmarket zip codes in general.

Is this the new upmarket zip code lingo for black and brown neighborhoods?

Low SES neighborhoods. Persons of color are thin on the ground in Appalachia for example. In fact, vast swaths of the white South are well, low SES.

I picked up "the lingo" from a now dead cousin (he died of obesity around the age of 45 Bushie). He referred to the "wrong zip codes" and the term just resonated with me, so I incorporated it into my lexicon. He was a fellow lawyer, and unlike yours truly a very sweet man. Among other things, he was very kind and caring about my blind mother, and patient with her - far more than I (I had a difficult relationship with my mother). I cried when he died. He lived right next to Dodger stadium. At my mother's remembrance farewell gathering, I saluted him as one of the three persons in her life for whom I was grateful that they were there for her.

Opebo, economics almost always trumps politics in the end. Just ask the folks that ran the Soviet Union. I know you don't like it, but such is life. I don't like the fact that I can't perform in bed as well as I could 20 years ago either. But yes, state policy is responsible for our suck educational system for the relative poors, and that is an impertinence and an outrage.

[Beet]

Opebo, economics almost always trumps politics in the end. Just ask the folks that ran the Soviet Union. I know you don't like it, but such is life. I don't like the fact that I can't perform in bed as well as I could 20 years ago either. But yes, state policy is responsible for our suck educational system for the relative poors, and that is an impertinence and an outrage.

It's one thing for state policy to be so oppressive to technological and market trends that it arrests them. It's another thing to say that state policy can play a role in ameliorating the impacts of inequality-generating growth. And under democratic government, that is what will tend to happen. The more natural market forces increase inequality, the greater will be the demand from the political system to re-balance matters to keep a lid on inequality. The only way economics can truly defeat politics here is by co-opting it, by turning politics into just another branch of economics, where legislators, like any other goods, can be bought and sold. But I don't think the good old days of the mid 19th century are ever coming back.

[opebo]

Opebo, economics almost always trumps politics in the end.

No, Torie, that's a false dichotomy.

[Torie]

Opebo, economics almost always trumps politics in the end. Just ask the folks that ran the Soviet Union. I know you don't like it, but such is life. I don't like the fact that I can't perform in bed as well as I could 20 years ago either. But yes, state policy is responsible for our suck educational system for the relative poors, and that is an impertinence and an outrage.

It's one thing for state policy to be so oppressive to technological and market trends that it arrests them. It's another thing to say that state policy can play a role in ameliorating the impacts of inequality-generating growth. And under democratic government, that is what will tend to happen. The more natural market forces increase inequality, the greater will be the demand from the political system to re-balance matters to keep a lid on inequality. The only way economics can truly defeat politics here is by co-opting it, by turning politics into just another branch of economics, where legislators, like any other goods, can be bought and sold. But I don't think the good old days of the mid 19th century are ever coming back.

Sure, of course, e.g., as I mentioned about educational policy. But such ameliorations can only do so much, as capital (and labor) moves to the most friendly niches for each around the globe. Just ask Greece if you don't believe me. If you try to "ameliorate" "too much," the economy just falls apart.

[k-onmmunist]

Opebo, economics almost always trumps politics in the end.

No, Torie, that's a false dichotomy.

well, they're intertwined. the state is simply the organizational wing of the ruling class.

[pbrower2a]

I had an epiphany on economics this morning.  A very moderate hero one, but one I am almost certain is right.

The conservatives are correct in the sense that Keynesian deficit spending does not create a good long term outlook for the economy though it does provide short term fixes.  A large government does eventually lead into inflation that prevents the economy from growing further, as we saw in the late 1970s.  There will eventually become too much crowding out in the GDP by the feds, leaving a very impoverished private sector.  A small government with a balanced budget amendment and management of recessions through the Federal Reserve and monetary policy would be a superior way of maintaining prosperity and preventing long recessions.

Keynesian stimulus is good for stopping or reversing economic meltdowns -- as in the 1930s and after the recent crash. All else during an economic meltdown is at best a wash and at worst an aggravation. Keynesian stimulus is one way to ensure that there is more to the economy than the failing sector that caused the meltdown. The 2007-2009 economic meltdown looks much like first year and a half of the most dangerous severe and dangerous economic meltdown that anyone can remember -- that of 1929-1932. The deeper the hole gets, the more difficult it gets to extricate us all from it.

It is of course the wrong solution for a little recession that results from a weeding out of failing entities in a time of technological change. At times the Romney solution -- disinvest from a company on the decline so that money can go into a growth industry -- is the wise solution. Cost-push inflation because an input gets more expensive (example: petroleum in the 1970s) -- Keynesian stimulus simply feeds inflation. High prices are best left to sort themselves out in substitution, conservation, and self-denial.

If the alternative to Keynesian stimulus is civil unrest -- maybe economic orthodoxies must be put on hold. No political leadership has an obligation to so ignore an economic calamity that might contribute to the rise of a Lenin or a Hitler.  

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The 43rd Presidency was the worst of both worlds on economics -- right-wing ideology that accompanied a huge expansion of government spending. The big spending went to wars for profit, an inefficient way in which to create income and jobs. Add to that support for a speculative boom in real estate with predatory lending, and we got a house-of-cards economy.

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Rescuing the poor is relatively inexpensive. If they get more food stamps, rent subsidies, or child care through the welfare system the money goes back into the economy.  Rescuing the middle class, much of which depends upon white-collar jobs in bureaucratized corporations long past the growth phase of their history and likely in decline, is far more difficult. Bureaucratic organizations depend upon revenue first, and rescuing too-big-to-fail banks and insurance companies implies subsidies or outright grants that first filter through ownership and the executive elite before they get to the glorified clerks.

Let us remember that for years what was much of the middle-income earning group comprised industrial and construction workers who got middle-income pay and spent it. Such people were not truly middle class -- but as a rule they churned out tangible, measurable production. College-educated people who now form the bulk of the middle class are usually better-suited to paper-pushing jobs whose abstractions at best represent something tangible that someone else does than at churning out tangible, measurable production. When the tangible, measurable production vanishes, then so does the usefulness of the abstract and intangible effort of college-educated, middle-class paper-pushers.

One difference between the recent Little Depression and the Great Depression is that economies going into the Great Depression relied much more heavily upon industrial activity and far less upon white-collar work.      

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Barack Obama is stuck with monetary policy for lack of any alternatives. Fault him if you wish, but when the Other Side insists that he fail unless he accedes to a grossly-unjust economic order that ensures only mass suffering for an indefinite time with improvements in the lives of people not already in the economic elite some time in the distant future -- maybe -- he might be left with some choices that nobody could ever want. We are stuck with an economic recovery as top-heavy as it could be.

Elections have consequences, and people who vote in a pig in the poke (the Tea Party types) may be setting themselves for something nastier than what they knew under Dubya.    

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Supply is the least of our problems, except perhaps in energy. We need ask ourselves whether the clutter that many of us have of electronic devices and software makes our lives better than they were in the 1950s. That's not to say that the technological miracles of recent decades haven't made life better. Some of us might not be around without some of the medical miracles since then. Vehicles are safer and more fuel-efficient. Our appliances sip energy in contrast to those of the 1950s. We are doing better with lesser material; the 46" HDTV of our time is far better in every respect than the early color TV sets that were heavy furniture with expensive picture tubes. Above all, consider that people are no longer consigned to poverty simply because they are black and live in the South.

The time in which people could make huge profits by meeting scarcities in desired goods is over. Services now take in more of the workforce than does manufacturing. The largest private employer in the USA is McDonald's. Far more people work for Wal*Mart than for General Electric.    

 

[Beet]

Opebo, economics almost always trumps politics in the end. Just ask the folks that ran the Soviet Union. I know you don't like it, but such is life. I don't like the fact that I can't perform in bed as well as I could 20 years ago either. But yes, state policy is responsible for our suck educational system for the relative poors, and that is an impertinence and an outrage.

It's one thing for state policy to be so oppressive to technological and market trends that it arrests them. It's another thing to say that state policy can play a role in ameliorating the impacts of inequality-generating growth. And under democratic government, that is what will tend to happen. The more natural market forces increase inequality, the greater will be the demand from the political system to re-balance matters to keep a lid on inequality. The only way economics can truly defeat politics here is by co-opting it, by turning politics into just another branch of economics, where legislators, like any other goods, can be bought and sold. But I don't think the good old days of the mid 19th century are ever coming back.

Sure, of course, e.g., as I mentioned about educational policy. But such ameliorations can only do so much, as capital (and labor) moves to the most friendly niches for each around the globe. Just ask Greece if you don't believe me. If you try to "ameliorate" "too much," the economy just falls apart.

Greece's problem is technical (below the very high level of this discussion), but we don't disagree on the principles, only perhaps on whether or not it's possible to arrest or even reverse the rise in income inequality sustainability through public policy. I haven't seen convincing evidence that we can't do that, particularly since we haven' tried very hard. Latin America generally has been doing that for the past dozen years, while holding their own in the global economy.

[Antonio the Sixth]

SHOCKER

[pbrower2a]

Contributing factors:

1. For years we had too little formation of small businesses that had a chance to grow into large-scale employers. Such may have been the result of the good times in which college education was cheap, competent people found it easy to latch onto steady work in the professions and in attractive positions in Corporate America. Such businesses that people formed in those days were largely professional practices (limited potential for growth in employment), franchises (heavily in fast food, a business infamous for low pay and high turnover of employees), and government contractors (reliant on the strength of the economy and the willingness of the politicians to impose taxes). In bad times people start businesses for lack of alternative. The 1930s were a good time for starting businesses because labor, capital, business property, and merchandise were available cheaply.

2. Jobs created have heavily been in low-pay activities (retailing, food service, hospitality, and domestic service) that not only pay little but afford few opportunities for career growth except for departure to another activity. Manufacturing, an activity that rewarded hard, disciplined work with middle-income pay, has shrunk greatly in recent decades. Think of the offshoring of industrial jobs.

3. We have seen the rise of an executive nomenklatura that, like its Soviet counterpart, rewards itself well on salaries for treating subordinates badly. The "new class" in America can exploit subordinates badly on behalf of existing elites without owning assets. Management compensation in private industry has gone to a multiple of hundreds of the pay of the mass work-force from the low single digits in the 1950s. The pattern has spread from for-profit industry to non-profits and to the government. Such itself implies severe inequality.

4. American business has become much less competitive. Trusts and cartels are the norm, and anyone who tries to compete gets ruined.  

5. The political system has learned to treat poverty as a Third Rail except for punitive rhetoric against the poor even while more people become poor. Right-wing politics have promoted the interests of fundamentalist Christianity and its Catholic equivalent in the Opus Dei movement as a substitute for concern of the plight of the working poor while coddling the economic elites. Right-wing politics is extremely anti-rational except on money-grabs by elites. People who believe that the solution to mass hardship is even more and harsher hardships now have little to offer except Pie in the Sky When You Die. The elites create wealth for themselves  without having to create any 'heavenly wealth'.