A short note on "progress"

Small additions to the unintended consequences of actions supported by the US government:

1. Following the fall of communism and the use of "shock therapy" on the Russian economy (and people) the life expectancy of in Russia nosedived. In 1991 life expectancy for men was 63.5 years; by 1994 it have dropped to 57.6 years. For women the drop was from 74.3 years to 71.2 years.
2. While the life expectancy in Iraq rose from the early 1950s to the late 1980s (from 44 years to 64 years), with the onset of economic sanctions, life expectancy for women plummeted from 65.2 years in 1990 to 60.8 years in 2000 and an estimated 500,000 children died. One can only speculate how far it has declined since the beginning of the Iraq War or what is happening in countries like Afghanistan, Libya, Yemen and Syria.
3. Mexico saw a "decline in life expectancy from 2005 to 2010 among men, mainly from large increases in homicides. It was during this period that the US increased its support for Mexico's military "war on drugs."

On another front, there has been concern about the abnormally high death rate among middle age white American males, due to drugs, alcohol and suicides. Analysis of this trend points to the decline in economic opportunity (due to the skyrocketing inequality in the US?)

"One of the greatest stories of the 20th century was that we doubled the life expectancy of adults," the head of the John A. Hartford Foundation, remarked recently.  It would appear that we are hell-bent on reversing that progress.

The “Precariat” and the Danger of Fascism

An article from the National Catholic Reporter which I read recently, discusses the ideas British economist Guy Standing, a professor at the University of London. Standing has proposed an updated system of economic classification, which at least on the surface, seems an accurate (and scary) analysis of class structure in developed countries.

He identifies the following classes:

• The plutocracy (the 0.001%)
• The elite (multi-millionaires whose earnings come mostly from ownership of capital)
• The entrepreneurs (creative, highly paid individuals, mostly young, who aspire to join the elite)*
• The salariat (those with long term employment security and benefits)
• The old working class (middle class wage earners with some benefits, although their wages and benefits are constantly under attack; they have little or nothing to fall back on)*
• The precariat (unstable labor, temporary jobs, in and out of work, few or no benefits, no savings)
• The poor

*    Indicate my description, not Standing’s.

Standing notes that both the salariat and the old working class are shrinking everywhere as more and more people are forced down into the precariat. Although lacking precise data, he argues that between 1/3 and 1/2 of the population in most developed nations are currently part of this growing sector. (Note: The fact that the last three recessions in the US have seen minimal “recovery” for everyone but the very wealthy is undoubtedly a major factor in the growth of this class.)

Standing uses the term precariat because their lives are so precarious and sees this class as composed of three parts: workers and their families that have fallen out of the old working class; young, educated individuals with few job prospects and a mountain of debt; and migrants (I think this should include other minorities who may not be migrants, particularly in the US). These groups often see themselves as pitted against each other, blaming the “others” for their precarious status.

This economic and social class, although it is very diverse, shares a number of characteristics.

• The suffer from high levels of stress
• They lack meaningful work and have no occupational identity
• They have no access to benefits and no financial security
• Their level of education is frequently above the work they do
• They are both young and old (think of the Wal-Mart greeters and the McDonald’s workers)
• THEY ARE ALIENATED, ANOMIC AND VERY ANGRY

Why is this important, you might ask? Because the basic conditions of alienation found in the precariat are vary similar to life experiences of the lower middle class Germans who provided the mass support for the Nazis in the period leading up to WW II. Erich Fromm, in his classic 1941 work Escape from Freedom, provides an analysis which links the alienation resulting from the development of capitalism, exacerbated by the Great Depression and disenchantment with democracy to the willingness of members of this class to subjugate themselves to the authoritarianism of the Nazis.

The similarities between 1930s Germany and the US (and many other developed countries) today ought to be on the table in every discussion of where we go from here. Understanding the nature of the crisis that confronts us is the first step to finding solutions BEFORE it’s too late.

While the Republican Party has been captured by the forces of extreme reaction and is leading the charge to fascism, all too often the opposition party (yes, I mean the Democrats) have made a Faustian bargain with the plutocracy, securing minor benefits for a few, while ignoring the structural problems that have eviscerated the old working class and the salariat and generally ignoring the poor. Only a genuine political revolution, targeting the sources of the great and growing inequality, can get to the root of the problem.

It’s time to act, before it’s too late. If we fail to learn from history, we will be doomed to repeat it.

And the rich get even richer

In case you were wondering if worldwide inequality was getting worse, the latest figures from Oxfam provide a definitive picture. In 2010 the richest 388 individuals held as much wealth as the poorest 1/2 of the world's population. As outrageous as that was, by 2016 the richest 62 individuals' wealth equaled that of the bottom 50% of the world's people (that's 3.5 billion folks!!!)

And so it goes on, with the accumulation of wealth at the top and the immiseration of all of the rest of us. I think it's clear that never in the history of human society, have we seen this level of worldwide concentration of wealth in the hands of a very, very few. And as the wealthy use their wealth to accumulate even more wealth, as capital's share of the world's income continues to increase and to be passed on from one generation to the next, this process seems to have no bounds.

This kind of accumulation is a product of our current system of unbridled capitalism. It stands in stark contrast to what was happening in the period between WW I and the 1970s. During that time the destruction of wealth (i.e., capital) during the two world wars and the depression, combined with government actions through taxation (both to meet the needs of war and to provide social services to their populations)  to restrain unlimited acquisition of wealth produced an extended period of wage and wealth compression.

This period came to an end in the late 1970s with the rise of  new economic theories based on the Chicago Schools (and the cheerleaders for globalization) and with the vast increase in the global mobility of capital. In the political sphere, the rise of Reagan and Thatcher, and the failure to develop a real critique of on the part of the opposition political parties, resulted in the end of any attempts by the government to maintain a robust public sphere and in the reversal of almost every form of government redistribution of wealth (and opportunity to acquire wealth) to those at the bottom.

All of which points to the critical role of government. Currently it facilitates the rising inequality with policies which favor the 1%, policies, which starved the public sphere (or privatized much of it), all the while granting huge subsidies to the wealthy. In the US Republicans have led the charge, but until the emergence of the Warren wing and the candidacy of Bernie Sanders, the establishment Democrats have followed meekly behind. Bill Clinton, Barack Obama and Hillary Clinton (if she is elected) all offer only insignificant palliatives, but don't support real change. Little wonder that the Democrats find it harder and harder to mobilize their constituencies and get them to the polls. What they offer just doesn't hack it.

When I was a kid my father used to say "no man should have two coats unless every man has at least one". This very simple justification for redistribution of wealth rings in my ear every time I read about the extreme inequality today. Call it socialism, call it morality, call it justice, call it freedom - call it whatever you want, let's just do it!

The rich get richer and the poor get???

It’s official. Not only are the rich getting wildly richer, not only is the middle class being eviscerated, but the poor are getting poorer. They are getting poorer not simply in relation to the wealthy, but in absolute terms. So says an analysis of US Census data by the Brookings Institute.

One example is the earnings of the bottom 20% of wage earners in Cincinnati. Since the recession which started in 2008 they have seen their incomes, when adjusted for inflation, decline a jaw-dropping 25%! And the decline has continued during the "recovery", falling 3% between 2013 and 2014.

Now this undoubtedly comes as no surprise to the poor, but it should shock the mainstream economists, who keep talking about an economic recovery. Recovery for whom? The banksters, the hedge fund managers, the rent-seekers, but not ordinary Americans, who continue to be trapped in a recession that is now 8 years old. There is no trickle down, only trickle up, up and away.

As if to put an exclamation point on this, the Supreme Court appears poised to deal another blow to the one institution which has the power to represent working Americans and fight against income inequality - labor unions in the case of Friedrichs v. California Teachers Assn. It is no coincidence that the period of greatest prosperity for ordinary Americans the US, from 1940 until the late 1970s, was also the period of strong labor unions, which fought in both the economic and political spheres for the rights and dignity of American workers. The lead attorney for the anti-union side made it very clear that the goal of this case was to force unions to be "less involved in things like politics."

As I write this post, it appears that even the coupon clippers on Wall Street are beginning to understand that you can only milk this cow for so long, before things begin to fall apart. Despite assurances from mainstream economists that “recovery is just around the corner” (or that it is already here) we are beginning to see fears that the bubble is about to burst.

There is a joke about the left, that we have predicted 9 of the last 4 recessions. Maybe it’s time to revise the punch line. Mainstream economists have predicted 3 of the last 0 recoveries. This time, however, it is definitely not funny!

Figures don't lie, economists do

It always amazes me how true the old adage, “figures don’t lie, but liars figure”, is. Take the mainstream economists. Month after month, year after year since the meltdown of 2008, they come up for statistics that claim that our economy has fully recovered (or, at least, that things are looking up).

I guess it shouldn’t surprise me that they basically function as cheerleaders for the banks and big business. After all that’s who pays them and whoever pays the piper, gets to call the tune.

Witness a syndicated article in today’s StarNews (Wilmington, NC) titled “Salaries poised to climb in 2016”. The economists from Moody’s and the Federal Reserve Bank of Atlanta (what did I say about big business and the banks paying the piper?) are cited as having found an improving trend in workers’ wages. They claim at “workers who have kept their jobs” saw a 4.1% year to year increase in the 3^rd quarter of last year. They managed to find this mildly optimistic showing by excluding new and part-time workers, since, if they are included, the rise in hourly wages drops to around 2%. WOW! What are folks going to do with all that extra money?

I guess these workers really don’t count – that is unless we are calculating the “unemployment” rate. There it’s convenient to include part time workers who want full time jobs as employed, but exclude workers who have given up finding work from the count of the unemployed. If we include the under-employed and the discouraged workers we get a figure about double the published rate of 5%.

One figure that gets a lot less play in the media is the labor participation rate which stands at its lowest since the late 1970s. It is a longer term trend that started during the dotcom bust of 2001 and accelerated after the 2008 crash. Not a positive sign at all for the future of the average family income. And this “reserve army” of workers definitely exerts a downward pressure on wages.

A more sober assessment of the US (and world) economy might raise concerns about the economic effects of inequality which has (at least in the US) reached heights not seen since the 1920s and continues to spiral out of control (sic). It would draw on the work of economists like Piketty, Stiglitz and Krugman who have raised red flags (oops, bad choice of color) about the growing inequality.

So the real economic picture in the US (and abroad) is not that rosy at all. But the economic pundits continue to spout their mantra that “prosperity (for all) is just around the corner”. Haven’t we heard that tune before?

So you see, the facts can be manipulated to prove the opposite of what is actually happening. That’s scary, almost as scary as Faux News and friends and the Republican candidates for President, who don’t want to be bothered by facts at all.

Taxation for Prosperity

I ran across this article in my old computer files. Not only does it give a summary of the strongest argument for progressive taxation, but the man who made it was a "famed corporate tax lawyer" and was named Randolph Paul. A little irony here? 

I've posted it with a few minor deletions and am hoping to find a copy of his aptly titled work "Taxation for Prosperity".

Why Do We Tax?

Years ago, right after World War II, America's most famed corporate tax lawyer gave an answer that had the nation's super rich squirming.

Over the past half-century, we’ve had a profound transformation in our attitudes toward income taxation. How profound? Consider the tax perspective of Randolph Paul, the corporate tax attorney who helped shape federal tax policy during and after World War II.

Randolph Paul probably thought about taxes — and their role in our society — as deeply as any American of his time. Paul lived and died taxes, literally. In 1956, he slumped over and passed away while testifying about tax policy before a U.S. Senate committee.

Paul’s tax career had started decades earlier. In 1918, just a few years after the federal income tax went into effect, Paul began specializing in tax law. By the 1930s, he had become one of Wall Street’s top tax experts. His clients ranged from General Motors to Standard Oil of California, and probably no one in America knew the tax code — loopholes and all — any better.

That knowledge made Randolph Paul invaluable to Franklin Roosevelt’s New Deal. In 1940, Paul helped New Dealers write an excess profits bill. In 1941, right after Pearl Harbor, he joined the Treasury Department and worked to make sure that all Americans, the wealthy included, contributed financially to the war effort.

Paul succeeded. By 1944, the federal income tax had become a major presence in American life. Most Americans, for the first time ever, were paying income tax — and rich Americans were paying the most taxes of all. During the war, the tax rate on income over $200,000, about $2.6 million today, jumped to 94 percent.

Two years after the war, back in private practice, Paul published his masterwork, the ultimate distillation of his thinking about tax policy. His new book, Taxation for Prosperity, presented a carefully argued case for continuing high wartime tax rates on peacetime high incomes.

In fact, Paul would argue, taxes in a mature economy offer us “powerful instruments for influencing the social and economic life of the nation.” With “well-planned taxes,” we could avert a next depression.

By “well-planned taxes,” Paul meant progressive taxes, steeply graduated levies that kept as much money as possible in the pockets of “people in the lower brackets.” Lower-income people, Paul explained, “have a higher propensity to spend.” Their spending keeps “the wheels of industry turning.”

For people in higher income brackets, by contrast, a “well-planned” tax system meant high tax rates. “The people with high incomes can best afford to contribute to the support of the government,” as Paul noted, “and the failure to impose substantial taxes in the upper brackets would seriously injure the morale of the rest of the taxpaying public.”

High taxes on people of high income, Paul continued, also “perform the valuable service of preventing more saving than our economy can absorb,” soaking up the excess that would otherwise wind up devoted to destabilizing speculation.

Could taxes on the rich ever go too high? That danger, Paul acknowledged, does exist in an economy that “depends upon the profit motive.” So taxes on the rich ought always be kept at a level that “fosters economic activity.” But the “need for this incentive,” Paul added, fades away “when we reach the highest brackets.” At that point, tax rates ought to rise “very sharply ” to help “counteract undue concentration of wealth.”

In other words, Paul summed up, we need a tax system that keeps “the nation’s wealth” from flowing “into the hands of too few.”

Over the next two decades, in the 1950s and 1960s, we had a tax system that for the most part played that role. Tax rates on America’s rich hovered at high, near World War II-era levels, and average Americans, over the course of these years, prospered as never before.

Since then, we’ve gone in the opposite direction. Our nation’s tax experts — and the elected officials they advise — no longer think about taxes as a tool for combating our “undue concentration of wealth.” They see taxes as a matter of raising revenue pure and simple.

Randolph Paul considered that attitude “immature.” We should, too.