Softpanorama
May the source be with you, but remember the KISS principle ;-)

Contents Bulletin Scripting in shell and Perl Network troubleshooting History Humor

Neoliberalism as a Cause of Structural Unemployment in the USA

News  Over 50 and unemployed Recommended Links The problem of inequality Computers eat people Underemployment Eroding Western living standards
The neoliberal myth of human capital Perma Temps Adverse Selection The problem of inequality Productivity Myth and "Rising labor costs" hypocrisy Scapegoating and victimization of poor  
Neoliberalism as a New Form of Corporatism Corporatism Casino Capitalism If Corporations Are People, They Are Psychopaths Toxic Managers Office Stockholm Syndrome Learned helplessness
Unemployment after graduation Fake Employment Statistics Destructiveness of GDP Mania   Financial Sector Induced Systemic Instability

Economics Pseudo Theories

Notes on Republican Economic Policy
John Kenneth Galbraith Invisible Hand Hypothesis Inflation vs. Deflation Lysenkoism Financial Humor Humor  Etc

Unemployment offices, homeless shelters,  hospitals, prisons and casinos. and are the only real growth industries of Obama Administration. In Jan 2010 35 millions, or one in eight Americans, were on food stamps.

Obama's  biggest — and only major — jobs program is the U.S. military


When I was a kid they told us that automation would "free" us from working long hours. What they didn't tell us what that they weren't going to pay us for all this leisure time we'd get.

Mass unemployment is the primary indication of the collapse of a given form of society -- James Burnham


Introduction


"Unemployment" statistics has been the political advertising media for every Administration in modern times

From comment in
The Rise of Invisible Unemployment
 The Atlantic, Nov 9, 2014

 

The institutions of neoliberal capitalism, while promoting an expanded role in the economy for "market forces" (read "financial oligarchy")  simultaneously transform labor relations. The “market” under neoliberalism certainly no longer refers to competition as a form of the production and distribution goods and services. Instead, it means something more along the lines of international financial monopolies protected by collusion between captured vassal state institutions (including neoliberal fifth column domination in the all major branches of government, especially executive and  legislative branches, educational institutions and media) and multinationals, which pay money to sustain this social order. The term “Free markets” under neoliberalism means letting rich people do what they want, not promoting efficient allocation of resources through competition and the price mechanism. The core of the fifth column are local oligarchs and so called "Chicago boys": sons and daughters of local elite who are trained for and indoctrinated for this purpose in Western universities. As aptly noted Neoliberalism – the ideology at the root of all our problems ( The Guardian,  April 15, 2016)

We internalize and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.

Never mind structural unemployment: if you don't have a job it's because you are unenterprising. Never mind the impossible costs of housing: if your credit card is maxed out, you're feckless and improvident. Never mind that your children no longer have a school playing field: if they get fat, it's your fault. In a world governed by competition, those who fall behind become defined and self-defined as losers.

Under neoliberalism labor relations assumes the form of full domination of labor by capitalists. Unions are officially suppressed and large part of middle class is brainwashed to hate using set of propaganda stories about unions corruption, welfare quinsy, lack of competitiveness in unionized industries (with Detroit as a prime story), etc.  In this sense crushing by Reagan of the strike of air controllers was one of the first manifestation of this dominance. Workers again are downgraded to the role of debt slaves, who should be glad to get subsistence wages. And, for example, wages in Wal-Mart are really on subsistence level, no question about it (Making Change at Wal-Mart » Fact Sheet – Wages):

Wal-Mart jobs are poverty-level jobs.
Wal-Mart's average sale Associate makes $8.81 per hour, according to IBISWorld, an independent market research group. This translates to annual pay of $15,576, based upon Wal-Mart's full-time status of 34 hours per week1. This is significantly below the 2010 Federal Poverty Level of $22,050 for a family of four. The Wall Street Journal reported that the average Wal-Mart cashier makes just $8.48 an hour, far below the $11.22 national average for all cashiers.

This contrasts with the capital-labor compromise that characterized the state capitalism that existed several post-WWII decades and that was crushed by neoliberalism in 1970th. Neoliberalism also brought change in the relation between financial and non-financial capital: financial capital now again like in 1920th plays a dominant role dictating the rules of the game to manufacturing sector and controlling it via banks.

Under neoliberalism the wealthy and their academic servants, see inequality as a noble outcome. University professors of economics form the most corrupt part of intellectual elite – they are nothing more than employees of the financial oligarchy paid to administer intellectual anesthetic to those among debt slaves, who still have enough time to ask what’s going on. They want to further enrich top 1%, shrink middle class making it less secure, and impoverish poor.  That's an officially state goal. Then in 1992, when asked what Iran-Contra was really all about, Bush I replied that it was done for "...the continuous consolidation of money and power into higher, tighter and righter hands."

The upward redistribution of wealth requires high unemployment to weep prols into unconditional obedience.  In other words neoliberalism and high unemployment are twins.

Under the disguise of "free market" Newspeak  neoliberals promote a type of economy which is often called a plantation economy. In this type of the economy all the resources and power are in the hands of a wealthy planter class who then gives preference for easy jobs and the easy life to their loyal toadies. The wealthy elites like cheap labor: it's much easier to  dictate their conditions of employment when unemployment is high.

Keynesian economics values the middle class and does not value unemployment or cheap labor, so it is incompatible with neoliberal ideology and needs to be suppressed.  Neoliberals created the system which richly reward stooges of neoliberalism for their loyalty to the top 1%  bestowing on them an easier life than they otherwise merit. In a meritocracy where individuals receive public goods and services that allow them to compete on a level playing field, many neoliberal academic toadies would be losers who cannot compete.

One of the most important measures of the health of an economy is the following criteria: how many fulfilling, living-wage jobs are created or destroyed (most other economic factors can be distilled to this.). For example, widely used measure of economic growth, GDP is too influenced by financial masturbation and does not distinguish useful activity from harmful or irrelevant. 

Under neoliberalism the elite revived Roman emperor Septimius Severus advice to his sons before he died at Eboracum (York) on  February 4, 211:

"Avoid infighting, pay well the soldiers, and ignore everybody else" . 

So during the Great Recession Congress simply tuned backs to unemployed. With the implicit message you just need to die out folks ;-).

Military budget at the same time was greatly expanded and several unnecessary wars were launched.  Brainwashed American public eats all those neoliberal policies like real lemmings, demonstrating the level of groupthink and lack of critical thinking that is typical for high demand cults. So the myth about highly conscious "proletariat" that Marxists cherished remains a myth. Moreover quite opposite tendencies to creation of "enlightened lower classes" show their ugly face (Chris Hedges America is a Tinderbox naked capitalism):

ictus92, July 21, 2013 at 5:07 pm

To paraphrase Madeline Albright: “What’s the point of creating a totalitarian police state if you’re not going to use it?”

So where is the American totalitarian state going? If you look at the NDAA and the discussion around repealing the Posse Comitatus Act, the key words include quelling “domestic civil unrest”… So what are the “deep government” types anticipating so hysterically?

Well, the financial crisis keeps grinding away and is about to enter another phase of collapse as “quantitative easing” has run its course. Interest rates are rising, posing “technical insolvency” of the Federal Reserve itself. What this means is that time’s up for the 46 million in the Food Stamp Supplemental Program; 56 million getting Social Security retirement or disability benefits; and at least 20 million more needing full time employment. Obviously there’s some overlap, but the total number of people living on the margins of subsistence pushes 30% of the population.

For these, they face an immediate “Final Solution”… not exactly direct extermination, but death by deprivation, illness etc. Can work camps be far off for these tens of millions and the many millions more living paycheck to paycheck? This population and their sympathizers comprise the tinder for “civil unrest”. Hence the corollary to the famous “Collect it all” (communications) is “control it all” (civil disorder following further economic collapse).

Furthermore, prolonged neglect of key infrastructure will lead inevitably to severe food, water and electric power access shortages — another source of civil unrest potential.

Of course, overseas the totalitarian police state eliminates all expression of opposition that can change policies in the quest for “Permanent War” and “full spectrum” military dominance. This ends in global military confrontation… just as the financial crisis of the 30’s gave rise to another World War… only this time around world war will pitch towards thermonuclear war in short order. That’s how totalitarian regimes collapse into catastrophe, dragging the rest of us to an unpleasant demise.

Unfortunately, I don’t think there’s a damn thing any of us can do to arrest this beserk Levithan…

tongorad, July 20, 2013 at 3:21 pm

This is America, not Denmark. In this country, tens of millions of people choose to watch FoxNews not simply because Americans are credulous idiots or at the behest of some right-wing corporate cabal, but because average Americans respect viciousness.

They are attracted to viciousness for a lot of reasons. In part, it reminds them of their bosses, whom they secretly adore. Americans hate themselves for the way they behave in public, always smiling and nodding their heads with accompanying really?s and uh-huhs to show that they’re listening to the other person, never having the guts to say what they really feel. So they vicariously scream and bully others into submission through right-wing surrogate-brutes. Spending time watching Sean Hannity is enough for your average American white male to feel less cowardly than he really is.

The left won’t accept this awful truth about the American soul, a beast that they believe they can fix “if only the people knew the Truth.”

But what if the Truth is that Americans don’t want to know the Truth? What if Americans consciously choose lies over truth when given the chance–and not even very interesting lies, but rather the blandest, dumbest and meanest lies? What if Americans are not a likeable people? The left’s wires short-circuit when confronted with this terrible possibility; the right, on the other hand, warmly embraces Middle America’s rank soul and exploits it to their full advantage. The Republicans know Americans better than the left. They know that it’s not so much Goering’s famous “bigger lie” that works here, but the dumber and meaner the lie, the more the public wants to hear it repeated.”

“We, The Spiteful” by Mark Ames

http://exiledonline.com/we-the-spiteful/

Dave, July 20, 2013 at 8:18 pm

Please consider that the “right” is far more realistic in their assessment of human nature. The “left” wants things to be according to what they think it should be, mostly because of their left wing educators. The majority of humans are not perfectible.

Even Asians, with their highly socialized societies, have behaved very badly towards those outside their country.

This tendency of self-deception of "blue color America" and resonating of Republican Party ideas within "working poor" and lower middle class, two strata of the US society that typically votes against its own economic interests is analyzed in   What's the matter with Kansas  And to fight neoliberal machine is not easy as media dominance is total, and on a new technological level, which does not require silencing of opponents, just ignoring them, approach the level typical for the USSR or Nazi Germany.  And even if some people question the system, like (at the very beginning) Tea Party did, or later "Occupy Wall Street" movement did, they are mercilessly co-opted or crashed by well paid guard labor. The latter is one of the few  types of employment which prospers under neoliberal empire. See  The Rise of Guard Labor (dollarsandsense.org)

The reality is that many rich countries including the USA now face two problems. One is a shortage of jobs, especially middle class jobs.  The other is stagnant (or falling) wages for those outside top 1%.  This is not a temporary problem. Despite all the propaganda smoke this is an immanent feature of neoliberal regimes that now dominate in the USA and most other countries.  Neoliberalism requires high unemployment as a way to keep workers in check and prevent attempts to slow down redistribution of wealth toward the top.

As George Bush Sr . noted in November 1992 neoliberalism is "the continuous consolidation of money and power into higher, tighter and righter hands". The essence is  the consolidation of money and power to the top 0.1% or even 0.01%.  In a very deep sense our new lords from financial and political oligarchy are not that different from feudal aristocracy, may be only less educated, more prone to avoid military service and much more greedy. 

Unlike Keynesian economy which put middle class in the center of society serving a buffer between rich and poor,  under neoliberalism  middle class is no longer needed as a buffer between aristocracy and proles, as repressive power of the state and regime of total surveillance (National Security State) makes an organized opposition practically impossible. The fate of "Occupy Wall Street" movement is nice illustration here.

On the other hand neoliberalism as an ideology, while discredited by event of 2008 still does not have any viable alternative.  Socialism was discredited by collapse of the USSR (which in reality was a neoliberal counterrevolution by Soviet nomenklatura including part of KGB).  Authoritarian versions of state capitalism does not look too attractive, despite being quite effective as was proven by economic progress of "Asian tigers".

Other important factors are also in play. Technology has stripped away the ability for many to hold a job and the trend continues.  In other words automation eats jobs. Outsourcing eats jobs too. Between those two trends almost no job growth left. This is a structural situation, not transitional caused by recession due to aftermath of 2008 financial bubble bust.  In other words jobs that disappeared will never return. And jobs in construction sector and finance were artificial and unsustainable in any case, crisis or no crisis (as in "what can't last forever eventually stops." )

We are in the midst of slow motion employment collapse. Eurozone unemployment recently reached 12%. The US has probably 20% rate of involuntary unemployment now. The official unemployment "rate" is lower, but that is because both 60-65 years old and 20 to 24 year olds are dropping out of the wage force.

Add to this "peak energy" problem and the situation looks really bleak. That's the funny thing about oil and modern civilization -- almost everybody in large western urban centers is dependent on mass produced technology (much of which was invented before we were born) and cheap oil (and generally cheap energy), Those who live in those urban centers no longer have any direct control or ability to produce own food or transportation energy or heating. those three activities are completely outsourced. See Peak Oil Demand is Already a Huge Problem.

Globalization is yet another problem. I was actually surprised by how many jobs large corporations managed to shred during 2008-2013 without negatively affecting  profitability.  The impression is that it is no low limit.  Usual wisdom is that if you shred too much, this labor shortage will bite you in a couple of years. This is no longer the case in the USA. No visible backlash at all.  Even consumption that should be suffering due to destruction of middle class in this process is no suffering much, because it was already mostly top 1% game and, as such, is recession proof. Here is one interesting comment form Krugman column Globalization and Macroeconomics - NYTimes.com

Floxo Australia

The analysis is flawed. The issue is not goods trade - on its own, this is relatively benign. The real problem is the associated capital drain. Owners of capital will transfer productive capital abroad for better returns. This process creates deep structural problems for all developed economies. Here are some basic predictions:

Recessions are difficult to manage and may become protracted. In a downturn, capital formation dries up but the capital drain continues. This erodes the output gap. A fiscal stimulus now has less headroom for expansion. On top of that, an increase in domestic demand may be met by investment in productive capital abroad; the domestic investment response is missing. This may even cause a fall in labor productivity ( UK productivity puzzle?).

In short, globalization IS the problem.

Unemployment and well being

Recessions generate inequality in both income and well-being: people who lose their jobs bear a disproportionate burden of the recession.  As Kathleen Geier noted the impact of unemployment on well-being it’s even worse than you thought

While reading this odd and meandering New York Times op-ed this morning, I stumbled upon a link to a fascinating study from last year on the impact of unemployment on non-monetary well-being. It was conducted by Stanford sociologist Cristobal Young, who discovered that unemployment has an even more catastrophic effect on personal happiness that we thought.

The study produced three major findings. The first is the devastating impact job loss has on personal well-being. Job loss, says Young, “produces a large drop in subjective well-being”:

Job loss into unemployment, however, is a different matter; this brings on deep distress that is greater in magnitude than the effect of changes in family structure, home-ownership or parental status. The distress of job loss is also hard to ameliorate: family income does not help, unemployment insurance appears to do little and even reemployment does not provide a full recovery [italics mine].

The second finding is that while unemployment insurance (UI) is successful as a macroeconomic stabilizer, it doesn’t make unemployed people any happier. UI, says Young:

is not central to their sense of well-being… [Snip] …[ I]t does little to support their identity, sense of purpose or self-regard.

Third, job loss has a strong, lasting negative impact on well-being that may persist for years:

[J]ob loss has consequences that linger even after people return to work. Finding a job, on average, recovers only about two thirds of the initial harm of losing a job. It is not clear how long it takes for the nonpecuniary effect of unemployment to heal.

Other research suggests that what Young refers to as “the scarring effect” of job loss can last from three to five years, or even longer. He also notes that “the more generalized fear of becoming jobless” may persist.

Young’s discussion of these findings stresses the inequality theme. He points out that “recessions generate inequality in both income and well-being: people who lose their jobs bear a disproportionate burden of the recession.” He suggests job-sharing as a way to reduce the concentrated misery of unemployment. That’s a great idea that unfortunately never seems to go anywhere. Employers today seem more interested in squeezing as much labor out of employees as possible for the lowest cost. They’re looking to shrink their payroll rather than expand it. And unfortunately, there are very few public policies that promote job-sharing, let alone do it effectively.

The sheer human misery created by the economic downturn has been stunning. The economic damage is, in some ways, the least of it. Another study shows that the long-term unemployed experience shame, loss of self-respect, and strained relationships with friends and family. They even suffer significantly higher rates of suicide.

Yesterday, Paul Krugman and others discussed the impact of economic inequality vs. unemployment on income. Krugman argued that inequality has had the greater impact, and I agree. Among other things, inequality is also the root cause of the unemployment problem. Special interests which have disproportionate power in our political system prevented more stimulus and inflicted an austerity agenda, which has had a disastrous effect on employment. Enacting an economic equality agenda will be huge political challenge, but it’s the only way I can see of ultimately resetting the priorities of our government so that it starts working on behalf of ordinary Americans again.

Official measures of unemployment

There are two popular unemployment measured U3 (commonly cited as "official unemployment rate", which dramatically understates real unemployment) and U6, which is close to actual unemployment rate as was measured during the Great Depression. U3 is often as low as half of U6 (that's why it sometimes called 50 cents unemployment rate). As The Big Picture note in the entry Unemployment Reporting

Its been pretty obvious for sometime that the Financial Media are doing a disservice to their readers by only reporting U3, given how dramatically it understates Unemployment. Indeed, consumer sentiment reports are at deep negative levels that only occur when Unemployment is much than what U3 has been saying. It is painfully obvious that U3 does not paint an accurate view of the Employment situation.

Here's the experiment I propose: Let's start reporting both, with appropriate descriptions of each. Report U3, add U6, provide monthly and year over year changes. Let the reader see the full picture, via BLS data.

See Table A-12. Alternative measures of labor underutilization

Factors that make the current unemployment structural

I would like to stress it again: many factors point to the fact that the current level of unemployment is mostly structural. In other words jobs eliminated will not be coming back. Among the most important factors we can mention:

  1. Neoliberal ideology, which prevents strong government action and direct employment by government on infrastructure projects like during New Deal. Related to the dominance of neoliberalism the hypertrophy of financial sector lead to games with "Main street" after which high, self-sustainable (aka structural) unemployment for in now a destiny for millions. Making the whole society sick.
     
  2. Outsourcing (which partially is due to much better communication channels available and computerized navigation)
     
  3. Computerization (which directly "eats jobs" much like during industrial revolution in the UK).
     
  4. High price of energy, which serves as strong depressing factor. If I remember correctly, a decade ago price of oil above $100 was considered an equivalent to permanent recession. This is never mentioned today, but still might be as true today as it was ten years ago: with the high price of oil the economic recovery is simply impossible. The only option, the only trajectory for economy is permanent stagnation.
     
  5. Growth of "lumpen-proletariat". Narcoaddicts, alcoholics, single mothers from poor families with just high school diplomas,  people with "generosity-based" high school (considerable part of Afro-Americans) and university diplomas from "diploma mills" (essentially fake diplomas),  various categories of handicapped, people with criminal records (substantial part of Afro-American male population), etc.  

The first three factors changed the distribution of power between labor and capital in favor of capital; and those guys are not inclined to take prisoners, when there is a chance to fatten their pockets.  None of the first three factors will probably be reversed soon, although neoliberal ideology is after 2008 entered a zombie state.

Also computerization and Internet allowed capital and political forces behind it much better organize politically. So like in in previous human history well organized and wealthy minority dictates its will less-organized poor majority.

I think that financial capital might eventually experience some setbacks. This bacchanalia of greed with those hedge fund  which hack financial system left and right  might come to an abrupt end with the rise of the price of oil. Even now price of oil indirectly pressure "masters of the universe".  And remember famous slogan of 2008 "Jump suckers" ;-). It reflects the society attitude to financial oligarchy and as such entail certain dangers of "blowback" for all those derivatives games.

Not under Obama watch as he is essentially a sock puppet of financial oligarchy. But eventually setback for "big finance" can happen. At the end of the day it is oil that is the real convertible currency and when oil production is diminishing or flat,  financial oligarchy will be pushed back. 

Measures taken by political elite to save financial institutions after 2008 collapse means that unemployment is a part of a general political problem with neoliberalism as a social system. Under neoliberal regime the elite can't care less about long term unemployment. National Security State ensures the security of the neoliberal elite. Elections in the USA are a sham as two party system effectively blocks candidates outside the list approved by the current elite.  The latter might even see sharp division of the society into "have" and "have nots"  as a solution of oil depletion problem (Economist's View):

bakho:

Exactly.

Monetary policy does not operate in a vacuum. Monetary policy operates in an economic system that includes fiscal and regulatory tools. It is a mistake to lock the fiscal and regulatory tools in a shed.

Fiscal policy ALWAYS operates in a recession, at least in the form of automatic stabilizers, (UI, etc.) and sometimes in the form of additional stimulus.

The meagre automatic stabilizers currently in place are enough for a mild recession, but are woefully short of what is needed in a recession like the recent one.

The primary objection to fiscal policy manipulations is that fiscal policy is more easily politicized. This overlooks the fact that monetary policy is not only political, but bankers (who constitute a wealthy special interest) have an agenda that tilts monetary policy to their own self interests.

The primary objection to using fiscal stimulus to address our unemployment crisis is POLITICAL. Wealthy special interests want pay less taxes and short term stimulus would interfere with their political agenda to roll back spending and reduce spending as a percent of GDP.

Wealthy special interests have the upper hand at the moment because enough politicians are dependent on their campaign donations. However, this politicalization of fiscal policy, doing too little to address unemployment, is the prime force behind the Fed keeping interest rates low. If enough fiscal stimulus was enacted to quickly return to full employment and inflation at or slightly above the target, the Fed would not have to consider extraordinary measures.

Anyone unhappy about extraordinary monetary measures should be urging Congress to fix unemployment now. This is not what our elites are doing. They are complaining about extraordinary monetary measures AND about additional stimulus. This suggests that these policy elites care nothing about social problems of long term unemployment, are content to have the US become a divided nation between haves and have nots and are content to oversee the creation of an underclass in order to concentrate wealthy upward.

When one is saying that unemployment became a structural problem that means that it is immune to the business cycle. For example, during the last economic expansion (Jan 2002 -Dec 2007), the median US household income dropped by $2,000. In other words many Americans were worse off at the end of an economic cycle as jobs went outsourced to low wage countries due to wage arbitrage... 

Collapse of Casino Capitalism and unemployment

The collapse of “casino capitalism” model in 2008-2009 was so profound that all sectors of the economy became depressed. As securitization mess exploded in the face of their creators as it became clear to everybody that the king is naked. Debt overhand of financial industry is tremendous and it was just socialized, not removed. Essentially it became the problem of the USA government debt. In many ways problems the USA faces now are more serious then the problems the country faced during Great Depression because economic crisis doubles as the crisis of dominant ideology -- the ideology of neoliberalism.  And the Great Recession, despite Economic Cycle Institute premature desire to bury it, is still with us. Five years in the making as of 2013.

Ideology on which FIRE sector dominance was based is now questioned and that creates additional problems both nationally and internationally, much more internationally. Internationally it means a substantial loss of the USA "soft power", the factor that played tremendous role in the decade of 1990-2000.  When other country laugh at the US financial oligarchy tribulations it is difficult to open new markets selling old neoliberalism doctrine. due to debt overhand the US dollar is replaced by currency swaps in national currency for several major trading partners of China such as Brazil and Russia.   First of all that makes the crisis even deeper and analogies between the USSR and the USA more sinister. As with Stalinists in USSR who destroyed the country economically, there is a powerful block of republican dead enders and democratic supporters of financial oligarchy (blue dogs) who  will continue to promote the current neoliberal course with its deification of "free markets" (free as in "free shooting zone"), oblivious to consequences of neoliberal policies which eat the society and protected by the size of their accounts. There is nothing new here. Oligarchic  democracies can commit suicide. Actually none lasted long. And with such a formidable political wrecking crew in action and gridlock in Congress even over minor reforms that became less probable.

For all practical purposes two party system actually works like one-party system: democrats were also captured by FIRE industries to the extent that they should not be considered an independent party, but as a slightly more moderate wing of the Republican Party. Similarly by all accounts Obama is a moderate Republican with the policies to the right of such Republican Presidents as Dwight Eisenhower and Theodore Roosevelt. In a way, Democratic Party perform the role of spoiler: it exists for the sole purpose of attracting disgruntled left-wing electorate away from more radical parties. Republicans play symmetrical role for right wing crazies. None can or want to became the agent of change. In this sense Obama electoral slogan "change we can believe in" was a nasty, cruel joke of political insiders over political outsiders.  Note how unceremoniously Obama dumped labor after his reelection, while courting it during his reelection campaign.

As private sector is still downsizing, and government can't be the employer of last resort due to dominance of neoliberal ideology, the whole situation looks more and more like Japanese lost decade. The only area where government can expand workforce are defense contractors (military keysianism):

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

It is important to understand that the USA is not just coping with the largest financial crisis in history, the USA is also going through a major restructuring of the American economy as well as the world economy due to plato in oil extraction. This transformation, which was postponed by two decades due the collapse of the USSR (which gave the USA companies half billion of new consumers and huge area to dollarize and buy assets for pennies on a dollar), will be very long, very painful and very slow. One additional factor that complicates the picture of "peak oil", is that it is  more properly can be called "end of cheap oil", as at higher prices more oil became economically available. So this is  not a peak but long plato.

As GDP is highly correlated with the energy consumption, the side effect of peak oil will probably be stagnant (close to zero after inflation) growth and with it speed up in permanent decline of the standard of living for middle class 

Also complicating the situation is the status of baby boomers which lost significant part of their savings during last two bubble bursts and now need to retire or will be pushed out of workforce. Pensions are already cuts either directly or indirectly (via inflation). For example, defined benefit pensions almost disappeared outside of government job force. After housing crash middle class no longer has a realistic prospect to fund their retirement and need to work longer: that increases competition for jobs. For middle aged professionals who are unemployed now the odds of finding reasonably paid work are low and they create additional competition for young people entering work force from universities. People over 50 now face especially poor job prospects.

At the same time corporate executives became corporate aristocracy (with differences in pay raising from 10-20 to 100-200 more of average corporate salary; this is the differences close to what used to exist in feudal societies). Most corporations are taking a lazy way out of the crisis with relentless cost-cutting.  This is a self-defeating strategy as cost cuttings eventually returns back via supply chain and bite the corporation which performs it. But so far this did not happened.

In addition productive sectors of economy are now under pressure of rampant financial speculation which serves as a huge tax on productive sectors of economy. Financial system is controlled by small number of large firms that permanently shifted their main activity into gambling and hacking of the financial system. There is some justice that computers which fueled all this crazy gambling on the strength of global reserve currency led to outsourcing of IT professionals to the extent that this part of US economy was destroyed and became a shadow of its former self in just ten years (2000-2010).

Another important sign of stagnation is that new college graduates face extremely bad job market which squeezes out anybody without substantial experience so for them it's Catch 22. Only graduates form Ivy League colleges has real prospect to get a job after graduation. Plus those with good family connections. In a way education is no longer a guarantee for better paying job, the same situation what was typical for the USSR and other countries of Eastern block during Brezhnev's stagnation.

There is also an interesting transformation of the quality of the education that also parallel transformation  experienced by the USSR in post-war period, but in especially acute form, three decades before the collapse. Private education became more like subprime lending.  It's quality became fake, as the term "diploma mills" suggests.  This rat rate to the lowest possible quality (quality instead of quality) was the central tendency in Brezhnev's USSR. 

In the USA in addition to devaluation of education caused by low quality "everything passes, everybody graduates, just pay" modus operandi of diploma mills, graduates from lower middle class families are now overloaded with debt, which creates for them really difficult situation and push many of them into low level service jobs like waiting. In other words excessive debt after college make getting into workforce using acquired specialty even more difficult as there is no space for long job search, relocation is more difficult and so on and so forth. 

There is also huge criminal industry that flourished around people desperate attempts to find well paying jobs. Many educational scams like "we will make you an ultrasound technician in six month; 90% of our graduates found jobs that pay over $60K in the first month after graduation"  or " software tester in four month; 100% of our graduates find jobs" are trying to capitalize of people desperate to find job, any job and getting into crushing debt trying to improve their chances in job market. Those criminals are not prosecuted.  For more information see:

The main source on new jobs is service sector and the lion share of new positions are McJobs

The employment growth comes mainly from the service sector which feeds off of consumer spending. It was hit by outsourcing especially in such areas as IT. Manufacturing no longer create jobs – outsourcing and computers eat them and you no longer need more people to make more stuff. 

Peter Dornan at EconoSpeak has the following comment which perhaps looks deeper at why the elite is so indifferent to mass unemployment and growing poverty in the U.S.

“…The process is more complicated: where one sits in society and the kinds of problems one typically has to solve leads to a way of thinking, and this manner of thinking then informs politics.

For centuries, the finance perspective has played a central role in economic theorizing, and there is ordinarily a body of research to support it. What I am proposing is this: economic orthodoxy is regaining control over policy because it reflects the outlook of those who occupy the upper reaches of government and business….”

http://economistsview.typepad.com/economistsview/2010/05/a-political-economy-moment.html

IMHO to get the economy out of this mess, government should concentrate on direct job creation (like was the case with Roosevelt administration), not on propping zombie banks hoping that they will generate credit necessary for creation o new jobs. Growth of credit will not happen and if it will happen it will not generate new jobs: most of it  is pushed into speculation.  Spectacular rise of S&P500 in first half of 2013 is a pretty good illustration of the process.

Long term high unemployment is a disaster for the country and disaster for the people, despite the fact that it is irrelevant for banksters, too busy playing in the huge casino they created. Failure to address this problem directly by Obama administration (which in economic terms is the second Summers-Bush administration making a joke in the slogan "change we can believe in") make Obama a real serial betrayer of people who elected him, the role he seems enjoy playing. 

Additional factors the complicates the picture

There are several additional factors that makes addressing the problem of chronic, structural unemployment even more difficult:

  1. The economic crisis coincides with deep ideological and political crisis.

    One can't solve the current problems the US are facing without the reform of the political system and institutions. Power of lobbyists need to be curtailed. Senate needs to be reformed.  Republican Party probably should be dissolved or temporary prohibited like Communists after the dissolution of the USSR as it is unable to reform. As there is no political will for political changes the crisis is structural and little people have to suffer.
     

  2. Real economy was damaged by excessive growth of  FIRE sector and associated "fictional" economy.  Real economy can't support the current size of FIRE sector and it needs now to downsized. There is no smooth, painless route back to the easy-money based false prosperity of Reagan-Clinton-Bush era (age of leveraging). A new economy needs to be created for sustainable recovery because the old, FIRE-based was unsustainable. In 2010 housing probably will decline further. Both commercial and residential construction continues to decline. States continue to cut back budgets creating negative feedback loop. Personal bankruptcies are up, more defaults are on the horizon. The U.S. economy needs to be re-structured, both on the "technical" and inter-sectoral level. That amounts to a collective, system-wide Chapter 11 re-organization. Obama administration has totally failed to sell the public on the validity of "stimulus", however named. Suspicion that this administration is a puppet of big banks had grown sharply. Trying to kick the can down the road will yield Republican Congressional majorities in both houses.
  3. The USA is experiencing the process of separation of workforce into two-tiers, with an elite class of highly paid employees at top companies and a subclass of minimal wage and part time laborers who work for less pay, have less job security and receive fewer benefits.
  4. Foreign wars have substantial financial costs and are an important drag on the USA economy. In the book True Cost of the Iraq Conflict, Joseph Stiglitz was estimated he cost at three trillion dollars of which probably only one trillion was offset by looting of Iraq resources. Afghanistan is about  $2 billion a week, and unless all heroin trade is controlled by CIA there is little that can offset those costs. This is the longest ongoing conflict in U.S. history.  And since Joseph Stiglitz book was written things became worse.

    The disability rates are higher. The cost of caring for the disabled are higher. Almost one out of two people coming back from Iraq and Afghanistan are disabled. This is an unfunded liability of—we calculate now to be almost a trillion dollars, over $900 billion. So, one of the big ways of reducing our deficit is a—is cut back some expenditures....

    With Libya and Syria added to the list, the hidden costs of foreign wars will weight on weakened economics more heavily. Annual cost per soldier oversees is approximately $1 Million per year.
  5. Rent that hypertrophied financial sector  extracts from the rest of the society continues to be a serious drag on the economy. This drag adds to substantial drag caused by foreign wars and military bases as well as huge military industrial complex. While parasites are omnipresent in nature, two large parasites instead of one might spells trouble for the host. Moreover the ascendancy of the financial sector and the decline of manufacturing in the U.S. ("Casino Capitalism" ) has implications similar to consequences of an organized crime running the country.  The creation of tangible products whose utility/quality can be more or less objectively measured were phased out in favor of "financial products," whose utility/quality is much easier to conceal behind legal/technical jargon and junk economics. That created a huge new class of white collar criminals. While Blankfein is out claiming that GS is doing God’s work, the reality is quite different: it became a training ground for new type of ruthless criminals, much more dangerous then bank robbers. Killing of Glass-Steagall by Clinton and leverage obtained by financial sector operating without regulatory limit created prerequisites to the financial panic of 2008. Glass-Steagall enshrined two principles that were abandoned:

    The violation of the second principle directly leads to a regulatory capture in which anything goes and a corresponding observed "need" to accommodate indiscretions, as with the Greenspan/Bernanke put. It perhaps should be identified as THE primary cause, since it left Wall Street with the well-founded (LTCM, Latin America debt crisis, etc. ) and since-proved belief that prudence and capital were quite unnecessary, and that reckless, sociopathic deal making is profitable. Four examples :

  6. Capture of the government and the media by financial sector makes the necessary reforms unlikely. “Failed Regulatory Oversight” is a politically correct term for corruption. The latter was probably the second reason of the current high unemployment . See Toxic Sludge is Good For You: Lies, Damn Lies and the Public Relations Industry by John C. Stauber
  7. Effects of coming CRE crash on unemployment and economy in general might be underestimated of official forecasts.  The occupancy rate is the malls and commercial buildings is still declining. Many strip malls in the country are still are empty. Nice office buildings with signs "for rent" are feature of landscape in 2013. Many buildings, even large well designed buildings with datacenter infrastructure are vacant for years and eventually are demolished.  A full scale commercial real-estate crash can also hurt the economy in a way similar to residential home estate crash. Loans that were made in 2005-2007 were refinanced for three years in 2009-2011. And again in 2012-2013. But eventually they will be coming home to roost.  This also affects the construction  sector.  Only $400 billion of loans came due by the end of 2009, but nearly $2 trillion was refinanced by 2012.  

    The collapse in the U.S. commercial real estate market is fought by the government will maximum force but government resources to fight the crisis are diminishing too. in 2011 state financial crises led to cuts in state budget. In addition, in June 2013 municipal bonds came under fire, making financing more costly.  Commercial debt is approximately one third of the size of the total residential debt and it is concentrated in the same places creating double whammy. In Florida commercial loans, broadly defined, are bigger then residential. Unlike residential real estate, problem with commercial real estate are not solved by growth of population and creation of new families.

    Retail and white-collar positions will be directly impacted by CRE crash. As stores and offices close, mall and office building owners suffer from cuts in cash flow and severely limited prospects for new tenants. Insurance companies, hedge funds and regional banks are heavily invested in CRE and are next in line so some financial jobs will be lost too. Extend and pretend might work but the question is if there is enough liquidity to stretch loans.
     

  8. Computers eat people jobs. Automation and the recent advances in robotic and computers make more and more workers redundant.  The latest victims are cashiers in supermarkets. Manufacturing jobs continue to disappear not only due to outsourcing, but also due to new computerized technologies. The reality is that manufacturing employs a mere 11.5 million workers in the U.S.A., or 9% of the workforce and this percentage will never increase substantially.

    My feeling is that even in corporate IT after drastic cuts that were the standard game for large corporations in 2008-2009, additional cuts are possible. But the situation on the ground is somewhat paradoxical as real cuts runs deeper that you would assume from headcount: a lot of current IT personnel belongs to "untouchable" caste -- wives of somebody higher up in this or linked by the supply chain company, sons of somebody important and so on. I can't give you percentage, but probably 10%-20% of "untouchables" would be an educated guess. So removing of at least 10% of the current IT workforce means removal of 12% or more those who do actual work. 

    Another factor is that cuts in IT are one way street as they stimulate replacing of people with technology and there are still tremendous potential for computerization of many areas including first of all IT itself.

    For example all this cloud initiatives are in disguise politically correct way to move things in the direction of higher automation and outsourcing because under the surface there is not much innovation in those "new" technologies.
     

  9. Oil prices despite coming down in September 2011 are back to $85-$90 level.  That level is putting additional stress on manufacturing, transportation and agriculture. Solid US growth of the past decade and earlier was dependent on two factors:

    With the rising oil all bets for re-inflating the economy (aka kicking the can down the road) are off.
     

  10. Indirect job creation strategies via stimulus to businesses seized to produce meaningful job generation. Reaganomics has put the U.S. economy into a high-unemployment equilibrium when the high-rate of labor unemployment is reinforced by the shortage (or absence) of idle, but useful capital stock due to offshoring and  outsourcing as well as chronically low consumer demand due to high level of debt. Only service sector and financial jobs can be generated with minimum capital infrastructure (for financial jobs internet connection and computer are almost all that needed). Automation of production lead to less and less workers.
     
  11. Confidence is really low.  Businesses have no confidence that customers ever return, therefore are not hiring much and scaling down the production. This chicken-egg-chicken-egg cycle has to be broken, but I am really puzzled how that is going to happen without large government role in the economy, which is big no-no for ideological consideration (the USA preaches neoliberalism as a "civil religion" similarly like USSR and other "communist" countries preached Marxism). Without large government projects employees have no confidence in their jobs, therefore are not consuming much.
     
  12. In the face of growing unemployment the current administration proved to be as incompetent as Bush administration in case of Hurricane Katrina. And that means totally incompetent.

Effects on population

Unemployment is a very harsh condition, that traumatize the workers greatly (Sliding into the Great Depression)

At first the unemployed searched eagerly and diligently for alternative sources of work. But if four months or so passed without successful reemployment, the unemployed tended to become discouraged and distraught.

After eight months of continuous unemployment, the typical unemployed worker still searches for a job, but in a desultory fashion and without much hope.

And within a year of becoming unemployed the worker is out of the labor market for all practical purposes: a job must arrive at his or her door, grab him or her by the scruff of the neck, and through him or her back into the nine-to-five routine if he or she is to be employed again.

The USA as a whole is facing the worst labor market prospects since 1929. In terms of duration of elevated unemployment we already rival the early 80s. But in no way we can expect a steep decline in the rate of unemployment in the way that happened in 1983 when unemployment declined at a brisk 2%. And permanent high unemployment creates economic conditions that feel like the USA brought back slavery. The new reserve army of the unemployed drives wages down, while average productivity continues to rise, as a way to generate surpluses to be channeled into executive bonuses. The whole sectors like IT were decimated by outsourcing. Unfortunately given the current overcapacity and ample supply of qualified job seekers in many occupations, I certainly don't expect labor arrangements and employment conditions to become more favorable.

Looks like 7% unemployment is going to become the "new normal". In any case government statistics is very suspect (see Fake Employment Statistics) and actually unemployment is higher. For example, the declining participation in work force means that actual unemployment rate is higher then reported.

Obama-Bush administration saved banks waiting most of taxpayers money and piling up debt in hopes that they restore credit flow in the economy. But this was a fallacy: banks aren’t lending to prospective home buyers, small businesses and real estate developers because bankers recognize the obvious — many of those loans won’t get repaid. Of course, as bankers refuse to lend, the stagnation becomes a self-fulfilling prophecy. But since society is burdened with too much debt, piling on more debt would not be the solution in any case.

There is no smooth, painless route back to the easy-money based false prosperity of Reagan-Clinton-Bush era (age of leveraging). We entered the age of deleveraging. Obama’s “you owe us” message to the banks is the height of naïveté’ and tells us a lot about him. In 2013 our problems are worse than they were in 2007 before the crisis. Peak credit is as dangerous for the economy as peak oil...

Corruption of economic profession

The inability of the economics profession to forecast unemployment in the short, medium, or long run would be downright comical, if not for the human tragedy involved. While the Occam Razor approach suggests incompetence as a culprit, I think it's a manifestation of the corruption of the profession by financial interests (with some "don't rock the boat" variations).  First of all, economists much like elected officials and Wall Street executives have a vested interest in keeping the perception of a robust economy. The employment data announced each month are critical to this perception. That's why government "prints up jobs out of thin air" the same way the Federal Reserve prints money. This is economic propaganda and as such it is not that much different from the over-stated earnings practiced by companies of all striped and colors.

The second problem is that fiscal policy cannot solve the problem of job creation in all circumstances, especially in deleveraging environment. Position of people like The Fed Can Help, But Fiscal Policy Is The Key To Job Creation ) is a step in right direction. But without something like Jobs Corps to get out of the current situation is very difficult. In 1982 SETH S. KING wrote in NYT (PROPOSAL FOR JOB CORPS RECALLS ROOSEVELT PLAN):

Few of this city's recent celebrations of Franklin Delano Roosevelt's 100th birthday have passed without nostalgic references to the Civilian Conservation Corps, that President's cherished vehicle for getting thousands of jobless, hungry youths off the streets and putting them to work refurbishing the nation's parks and forests.

With today's unemployment rate nearing a postwar high and new thousands of young people again unable to find work, Congress is preparing to wrestle with the Reagan Administration for money to start a new youth job training program and reconstitute the Job Corps, the pale copy of the old C.C.C. that emerged in the Carter days.

But there is little in these plans that is likely to reproduce those Depression era pictures of sturdy, bare-chested young men planting trees, building bridges and saving the nation's battered farmlands.

Nor is today's procedure-encumbered Washington, where a year usually elapses between idea and action, likely to duplicate the astonishing start on the C.C.C., which four months after being conceived had been approved by Congress and had more than 300,000 young men being clothed, housed, fed and paid $30 a month while they breathed all that fresh air.

In this crisis the main lesson was that theologically captured by free market fundamentalism government can destroy economy at a really staggering rate. This is "Back in the USSR" situation. Eight years of Clinton and eight years of Bush administration (see The Economic Consequences of Mr. Bush, by Joseph E. Stiglitz) are as good proof of this as one can ever get. Clinton and Bush regimes (especially Rubin-Greenspan alliance and "vice president from an undisclosed location" activities)  proved to be a real wrecking crew. But that does not mean that government cannot put it weight on easing the unemployment burden. Incentives such a investment tax credit matters. Not tax cuts for the rich, but direct investment credit. direct job creation which is anathema to market fundamentalism would be even better and less costly. Roosevelt administration did it, so why not capitalize on positive experience and develop it further ?

In this crisis the main lesson was that theologically captured by free market fundamentalism government can destroy economy at a really staggering rate.

In any case socializing losses and privatizing gain (crony capitalism) should be downsized. Insurance for gambling by big banks should be cut.

As long as economists believe their report card is the rise in GDP (GDP Mania), we will remain in a failure mode. A country is not defined by GDP but by the quality of life of its citizens. And quality of life cannot be assessed by a simplistic, one-dimensional metric such as GDP. The key dimensions for well-being are: employment, earnings, wealth, health, infrastructure, and living conditions. In that particular order. With employment as the critical factor: the USA looks like an underdeveloped banana republic by the current measure of unemployment and in many respect has became such.

It looks like high persistent unemployment became the defining feature of this recession. Jobs creation prospect in 2014 look pretty grim -- there is no sector other then government that can absorb redundant workforce and automation in manufacturing makes sure that those who are unemployed right now will stay unemployed in the foreseeable future. Most jobs cut are permanent, not temporary, especially in such sectors as IT (structural shift). As Robert Reich noted:

...The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They’ve discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.

This means many Americans won’t be rehired unless they’re willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay... Or they've lost higher-paying jobs and are now in a new ones that pays less.

The current crisis also means that financial services and real estate (FIRE) economy, this gigantic casino that the US government was trying to build for the last 25 years is now in trouble and shed workers in vast numbers (although working condition in financial industry are still good or very good depending on your position in the food chain). But the profitability of large banks and can achieved only by oversees expansion and derivatives games with foreign assets. The most profitable essentially converted themselves into hedge funds, getting most profits from trading operations, not from the traditional banking activities.

The simplest and the most obvious solution in the current situation is to cut work week and hours of work (4 days six hours a day). That will put enough people to work to make unemployment bearable and it might slightly help entertainment and hospitality industries which now is suffering more that others. From the other point of view if lower standard of living is inescapable, why not to make the transition smoother and more fun by cutting work hours.

Military Keynesianism no longer works

But that's not enough. The USA needs drastically cut military budget. Military Keynesianism no longer works as expected.  As John Maudin in his e-letter proposed (see Thoughts on the Economy- Problems and Solutions):

Mauldin: Unemployment is likely to continue to rise and last longer than ever before. We have to take care of the basic needs of those who want work but can't find it. Unemployment insurance should be extended to those who are still looking for work past the time for benefits to expire, and some program of local volunteer service should be instituted as the price for getting continued benefits after the primary benefits time period runs out. Not only will this help the community, but it will get the person out into the world where he is more likely to meet someone who can give him a job. But the costs of this program should be revenue-neutral. Something else has to be cut.

Mish: Can we deal with 15 million volunteers? Somehow I doubt it.

Mauldin: We have to re-think our military costs (I can't believe I am writing this!). We now spend almost 50% of the world's total military budget. Maybe we need to understand that we can't fight two wars and support hundreds of bases around the world. If we kill the goose, our ability to fight even one medium-sized war will be diminished. The harsh reality is that everything has to be re-evaluated. As an example, do we really need to be in Korea? If so, why can't Korea pay for much of the cost? They are now a rich nation. There are budgetary fiscal limits to being the policeman for the world.

Mish: Bingo. We can easily slash our military budget by 70% and still be the most powerful nation in the world. Moreover, it is time to declare the war in Iraq and Afghanistan over, pack our bags and leave. Gradually, over the next 5-8 years we should bring home all our troops from literally every county they are stationed.

This chart shows the absurdity of our spending.

Chart courtesy of Global Issues - World Military Spending.

By the way that chart does not include the latest increase in the US military budget. Please consider US lawmakers pass 680-billion-dollar defense budget bill

The US House of Representatives passed a 680-billion-dollar defense authorization bill on Thursday that includes funds to train Afghan security forces and more mine-resistant troop carriers.

Lawmakers defied President Barack Obama's veto threat and approved 560 million dollars to continue work on an alternative engine for the F-35 fighter jet built by General Electric and British manufacturer Rolls-Royce.

The compromise legislation would also raise military pay by 3.4 percent -- half a percentage point higher than Pentagon recommendations -- and assign 6.7 billion dollars for mine-resistant armored vehicles known as MRAPs, which is 1.2 billion dollars more than the administration had proposed.

Nearly $700 billion dollars of "defense" spending. The amount needed for actual defense is 20% of that at most, and more likely 5%. Balancing the budget is easy if you start here.

Mauldin: Glass-Steagall, or some form of it, should be brought back. Banks, which are subject to taxpayer bailouts, should not be in the investment banking and derivatives-creating business. Derivatives, especially credit default swaps, should be on an exchange, and too big to fail must go. Banks have enough risk just making loans. Leverage should be dialed down, and hedge funds selling what amounts to naked call options in any form, derivative or otherwise, should be regulated.

Mish: What we need to do is get rid of the Fed, FDIC, and fractional reserve lending. Regulation has failed every step of the way. Regulation created Fannie Mae, Freddie Mac, and the Fed. Regulation by the SEC anointed Moodys, Fitch, and the S&P as debt rating companies. We do not need more regulation, we need less regulation, a sound currency, and no Fed. Regulation is clearly the problem, yet the cries for still more regulation come from nearly every corner save the Austrian economists.

Mauldin: Let me see, is there any group I have not offended yet? But something like I am suggesting is going to have to be done at some point. There is no way we can continue forever on the current path. At some point, we will hit the wall. The fight between the bug and the windshield always ends in favor of the windshield. The bond market is going to have to see a credible effort to get back to a reasonable deficit, or we risk a very difficult economic environment. The longer we wait, the worse it will be.

Mish: "Is there any group I have not offended yet?" Yes. You failed to offend those on public pension plans. Not to fear, I did that myself in Five Major Pension Problems - One Simple Solution.

Unsolvable Problems


Top updates

Softpanorama Switchboard
Softpanorama Search


NEWS CONTENTS

Old News ;-)

Index 2017 2016 2015 2014 2013 2012 2011 2010 2009

[Jun 24, 2017] Michael Hudson: Are Students a Class?

Notable quotes:
"... the use of debt as a primary weapon in class warfare ..."
"... They were in hock to the man, and eventually became slaves to him. This structure, of sharecropping and usury, held together by political violence, continued into the 1960s in some areas of the South. As late as the 1960s, Kennedy would see rural poverty in Arkansas and pronounce it 'shocking'. These were the fruits of usury, a society built on unsustainable debt peonage. ..."
"... Today, we are in the midst of creating a second sharecropper society ..."
"... Today, the debts do not involve liens against crops. People in modern America carry student loans, credit card debt, and mortgages. All of these are hard to pay back, often bringing with them impenetrable contracts and illegal fees. Credit card debt is difficult to discharge in bankruptcy and a default on a home loan can leave you homeless. A student loan debt is literally a claim against a life - you cannot discharge it in bankruptcy, and if you die, your parents are obligated to pay it. If the banks have their way, mortgages and deficiency judgments will follow you around forever, as they do in Spain. ..."
"... By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is J is for Junk Economics ..."
"... Students usually don't think of themselves as a class. They seem "pre-class," because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class. ..."
"... But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student's means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job. ..."
"... Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the "permanent Obama economy" in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing. ..."
"... Students are the new NINJAs: No Income, No Jobs, No Assets. But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That's why so many have to keep living at home. ..."
"... A must-read primer on debt peonage and how universities are basically real estate hoarders and debtor magnets for the banks. ..."
"... Not to mention the incredible amount of cheating that goes on at universities. I guess cheating at college is training for joining the Kleptocracy. ..."
"... The question to ask, I think, is about the sustainability of this inversion of the dream of education as the path to upward mobility. People do not need to fully, or even partially, intellectually grasp the causes of their misery and sense of failure and futility to overthrow the status quo. This is the ideal -typically coming from the left- where informed citizens will recognize class conflict in its current form, neoliberal policies enriching the 1% and impoverishing most of the rest, and take over the government by voting out corrupt and captured politicians. ..."
"... Once the difference between education and indoctrination is learned, thee student and debtors in general can be "woke." How many students even think they should put themselves through a process of de-institutionalization, especially if they've followed the course of 1st grade to college graduation without a break? ..."
"... Today, the debts do not involve liens against crops. People in modern America carry student loans, credit card debt, and mortgages ..."
"... Perhaps Michael Hudson is – somewhat sloppily – referring to the IIRC typical case where getting the loan requires someone to sign on as guarantor, normally the student's parents. ..."
Jun 01, 2017 | www.nakedcapitalism.com

Yves here. Matt Stoller anticipated the situation Michael Hudson describes, the use of debt as a primary weapon in class warfare. From a 2010 post :

A lot of people forget that having debt you can't pay back really sucks. Debt is not just a credit instrument, it is an instrument of political and economic control.

It's actually baked into our culture. The phrase 'the man', as in 'fight the man', referred originally to creditors. 'The man' in the 19th century stood for 'furnishing man', the merchant that sold 19th century sharecroppers and Southern farmers their supplies for the year, usually on credit. Farmers, often illiterate and certainly unable to understand the arrangements into which they were entering, were charged interest rates of 80-100 percent a year, with a lien places on their crops. When approaching a furnishing agent, who could grant them credit for seeds, equipment, even food itself, a farmer would meekly look down nervously as his debts were marked down in a notebook. At the end of a year, due to deflation and usury, farmers usually owed more than they started the year owing. Their land was often forfeit, and eventually most of them became tenant farmers.

They were in hock to the man, and eventually became slaves to him. This structure, of sharecropping and usury, held together by political violence, continued into the 1960s in some areas of the South. As late as the 1960s, Kennedy would see rural poverty in Arkansas and pronounce it 'shocking'. These were the fruits of usury, a society built on unsustainable debt peonage.

Today, we are in the midst of creating a second sharecropper society

Today, the debts do not involve liens against crops. People in modern America carry student loans, credit card debt, and mortgages. All of these are hard to pay back, often bringing with them impenetrable contracts and illegal fees. Credit card debt is difficult to discharge in bankruptcy and a default on a home loan can leave you homeless. A student loan debt is literally a claim against a life - you cannot discharge it in bankruptcy, and if you die, your parents are obligated to pay it. If the banks have their way, mortgages and deficiency judgments will follow you around forever, as they do in Spain.

Young people and what only cynics might call 'homeowners' have no choice but to jump on the treadmill of debt, as debtcroppers. The goal is not to have them pay off their debts, but to owe forever. Whatever a debtcropper owes, a wealthy creditor owns.

And as a bonus, the heavier the debt burden of American citizenry, the less able we are able to organize and claim our democratic rights as citizens. Debtcroppers don't start companies and innovate, they don't take chances, and they don't claim their political rights. Think about this when you hear the calls from ex-Morgan Stanley banker and current World Bank President Robert Zoellick and his nebulous mutterings pining for the gold standard. Or when you hear Warren Buffett partner Charlie Munger talk about how the bailouts of the wealthy were patriotic, but we mustn't bail out homeowners for fear of 'moral hazard'.

Or when you hear Pete Peterson Foundation President and former Comptroller General David Walker yearn nostalgically for debtor's prisons.

Focusing on students, Hudson shows how much "progress" has been made in a mere seven years.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is J is for Junk Economics

Students usually don't think of themselves as a class. They seem "pre-class," because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class.

But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student's means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job.

The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class.

Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the "permanent Obama economy" in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing.

Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don't take risks. That's what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today's emerging fictitious "as if" economy. The government will pay the banks "as if" there is actually a recovery.

And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.

This is simply a replay of what banks have negotiated for real estate mortgage lending. Students who do succeed in getting a job hope to start a family, or at least joining the middle class. The most typical criterion of middle-class life in today's world (apart from having a college education) is to own a home. But almost nobody can buy a home without getting a mortgage. And the price of such a mortgage is to pay up to 43 percent of one's income for thirty years, that is, one's prospective working life (in today's as-if world that assumes full employment, not just a gig economy).

Banks know how unlikely it is that workers actually will be able to earn enough to carry the costs of their education and real estate debt. The costs of housing are so high, the price of education is so high, the amount of debt that workers must pay off the top of every paycheck is so high that American labor is priced out of world markets (except for military hardware sold to the Saudis and other U.S. protectorates). So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers.

The Federal Housing Authority guarantees mortgages that absorb up to the afore-mentioned 43 percent of the applicant's income. Income is not growing these days, but job-loss is. Formerly middle-class labor is being downsized to minimum-wage labor (MacDonald's and other fast foods) or "gig" labor (Uber). Here too, the fees mount up rapidly when there are defaults – all covered by the government, as if it is this compensates the banks for risks that the government itself bears.

From Debt Peons to Wage Slaves

In view of the fact that a college education is a precondition for joining the working class (except for billionaire dropouts), the middle class is a debtor class – so deep in debt that once they manage to get a job, they have no leeway to go on strike, much less to protest against bad working conditions. This is what Alan Greenspan described as the "traumatized worker effect" of debt.

Do students think about their future in these terms? How do they think of their place in the world?

Students are the new NINJAs: No Income, No Jobs, No Assets. But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That's why so many have to keep living at home.

The problem is that as they do get a job and become independent, they remain dependent on the banks. And to pay the banks, they must be even more abjectly dependent on their employers.

It may be enlightening to view matters from the vantage point of bankers. After all, they have $1.3 trillion in student loan claims. In fact, despite the fact that college tuitions are soaring throughout the United States even more than health care (financialized health care, not socialized health care), the banks often end up with more education expense than the colleges. That is because any interest rate is a doubling time, and student loan rates of, say, 7 percent mean that the interest payments double the original loan value in just 10 years. (The Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt. Just divide 72 by the interest rate, and you get the doubling time.)

A fatal symbiosis has emerged between banking and higher education in America. Bankers sit on the boards of the leading universities – not simply by buying their way in as donors, but because they finance the transformation of universities into real estate companies. Columbia and New York University are major real estate holders in New York City. Like the churches, they pay no property or income tax, being considered to play a vital social role. But from the bankers' vantage point, their role is to provide a market for debt whose magnitude now outstrips even that of credit card debt!

Citibank in New York City made what has been accused of being a sweetheart deal with New York University, which steers incoming students to it to finance their studies with loans. In today's world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties.

It is the same thing with housing, of course. However much the owner of a home receives when he sells it, the bank will make an even larger sum of money on the interest charges on the mortgage. That is why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent.

Under these terms, a "more educated society" does not mean a more employable labor force. It means a less employable society, because more and more wage and consumer income is used not to buy goods and services, not to eat out in restaurants or buy the products of labor, but to pay the financial sector and its allied rentier class. A more educated society under these rules is simply a more indebted society, an economy succumbing to debt deflation, austerity and unemployment except at minimum-wage levels.

For half a century Americans imagined themselves getting richer and richer by going into debt to buy their own homes and educate their children. Their riches have turned out to be riches for the banks, bondholders and other creditors, not for the debtors. What used to be applauded as "the middle class" turns out to be simply an indebted working class.

HBE , June 1, 2017 at 8:21 am

In today's world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked.

Banks are (debt) slave owners, but universities are the (debt) slave merchants and overseers. Which is probably why campuses aren't filled with groups fighting for labor rights or discussing the abysmal economic reality they face.

Instead virtue signalling, woke IdPol is the dominant focus, which is just fine with the overseer, and nurtured by the comfortable tenured faculty, who are often quite happy having little debt slave house servants of their own (grad students, adjuncts).

And even worse the overseers (universities) don't put the revenue generated by slaves into improving classes, hiring more full time faculty, or a host of other factors that improve the quality of education.

They funnel it into aesthetics to make things look more appealing on tours, and materials, they use to attract more slaves, all the while crapifying quality of education. Which is the moat odious aspect of their role, they arent using the slaves to build a better educational system, but to get more slaves. The number of useless PowerPoint lectures I sat through makes me angry when I think about it.

Universities are the wives (or husbands) that look on and enable child abuse Almost, if not more disgusting than the abuser (banks).

And this is coming from a lucky grad who managed to stay out of the gig economy.

nycTerrierist , June 1, 2017 at 8:42 am

Well put. Outstanding posts by Stoller and Hudson. A must-read primer on debt peonage and how universities are basically real estate hoarders and debtor magnets for the banks.

hemeantwell , June 1, 2017 at 5:59 pm

Credit where it's due: I'm a fan of both Stoller and Hudson, but I believe Hudson has been emphasizing debt in his writings far longer than Stoller. From Wikipedia:

Hudson [aged 78] devoted his entire scientific career to the study of debts: both domestic (loans, mortgages, interest payments) and external. In his works he consistently advocates the idea that loans and exponentially growing debts that outstrip profits from the economy of the "real" sphere are disastrous for both the government and the people of the borrowing state: they are washing money (going to payments to usurers and rentiers) from turnover, not leaving them to buy goods and services, and thus lead to "debt deflation" of the economy "

Stephen Gardner , June 1, 2017 at 9:05 am

The rentier class is just a bit out over its skis on this. First, college debt is not "out of sight our of mind" the way rural poverty in the deep south is and was. The victims of the banks are geographically well distributed and numerically much greater than southern sharecroppers. I don't think the demographics of the Bernie Sanders movement is any accident. Young people in this country are not illiterate farmers. They often are well educated. Furthermore an education is something that cannot be confiscated by a bank in lieu of payment on a loan. Geographic distribution of victims is very important from the point of view of networking. As much as we have become more isolated as individuals due to some of the forces present in American society, victims of the rentier class are in close proximity to one another and in contact. They are also present all over the US. Like a fire fed by uncut underbrush in a forest the flames may spread quickly. When it happens, none of the prognosticators will have seen it coming–not even those of the left.

justanotherprogressive , June 1, 2017 at 10:09 am

While I agree with your post, I quibble with your first line. I don't think the rentier class is "over its skis" with this one any more than the airline industry is "over its skis" with what it has been doing. As long as people are willing to put up with these tactics, they will continue .and get worse. There is no incentive for them to stop or slow down .

UserFriendly , June 2, 2017 at 12:30 am

It's not that people put up with it I know dozens that just have no hope, faith, or sense that change is even possible; so crippled with anxiety over their finances that they are utterly useless, myself included. When there is no light at the end of the tunnel it is almost impossible to muster the effort to do anything.

David , June 1, 2017 at 10:36 am

"Furthermore an education is something that cannot be confiscated by a bank in lieu of payment on a loan."

..which is why the government guarantee exists – coupled with the fact that the "education" for most is largely a myth – a degree is not an education.

As widely reported in NYC public schools last year – the graduation rate is 86%, but tests show less than 4% comprehension for math and english as reported in the NYP last year – same is largely true for higher education except for the price tag. The sharecroppers at least had tangibles to show from the financing exercise however meager they might be at the end of the day – the degree is largely worthless.

The banks will do .. fine

Allegorio , June 1, 2017 at 12:22 pm

Not to mention the incredible amount of cheating that goes on at universities. I guess cheating at college is training for joining the Kleptocracy.

DanB , June 1, 2017 at 11:43 am

The question to ask, I think, is about the sustainability of this inversion of the dream of education as the path to upward mobility. People do not need to fully, or even partially, intellectually grasp the causes of their misery and sense of failure and futility to overthrow the status quo. This is the ideal -typically coming from the left- where informed citizens will recognize class conflict in its current form, neoliberal policies enriching the 1% and impoverishing most of the rest, and take over the government by voting out corrupt and captured politicians.

What is far more likely is that scapegoats are offered -a la Trump or some other demagogue. (But scapegoating leaves exploitation unresolved.) Whichever occurs, the current system of exploitation cannot go on, especially when all the other factors associated with hitting the limits to growth are considered.

LT , June 1, 2017 at 12:16 pm

Once the difference between education and indoctrination is learned, thee student and debtors in general can be "woke." How many students even think they should put themselves through a process of de-institutionalization, especially if they've followed the course of 1st grade to college graduation without a break?

Dead Dog , June 1, 2017 at 10:20 am

Thank you Michael. I studied economics at ANU and went through the period when Australia considered the cost of a university education, which back in the early 80s was free (I think we paid around $150 by way of Union subs). One of the new questions for students was the issue of education being a private or public good.

The Labor Treasurer at the time (and later Prime Minister), Paul Keating, made it quite clear that education had more of the characteristics of a private good and the benefits (public good aspect) of a quality education for the country were erased and have never been seen (discussed) again.

Money changed university and that change has not been positive for the institutions or the citizens they serve.

Grumpy Engineer , June 1, 2017 at 10:21 am

This article is a little misguided. I absolutely agree that excess student debt is becoming a major problem in American society that is causing all sorts of real problems, but to blame "the bankers" is to point a finger at the wrong culprit.

The true culprit is grotesque symbiosis between the colleges & universities and the US Department of Education , which issues over 90% of student loans. If you want to know who the predatory lender is here, look to Washington. The banks are just participating at the edges of our student loan fiasco.

Part of the problem is the popular concept of "good debt" vs. "bad debt", as espoused by economists such as Jared Bernstein. "Good debt" helps increase your earning potential, so the more good debt the government pushes on the populace, the better. Right? It's a popular concept in DC.

And it's crap. And the government is crushing an entire generation of students with excess debt in the process. I think Michelle Singletary summarized it well: Yes, All Debt is Bad Debt .

diptherio , June 1, 2017 at 11:05 am

So you think that the banksters are only profiting on this by accident? Who do you think is lobbying to have student loan debt made non-dischargeable? Who do you think is lobbying the Dept. of Ed. to guarantee all those loans?

For sure, there is more than enough blame to go around, and multiple actors have earned their share. But to place the majority of the blame outside the financial sector that, as Hudson points out, always profits MORE from debt than the people whose products that debt is used to buy, is a bit on the bizarre side.

Banks make money by creating debt and getting their victims er, customers to take that debt on. Therefore, bankers have an interest in increasing the overall level of debt in an economy. When you see debt skyrocketing, look around for an unscrupulous banker.

Grumpy Engineer , June 1, 2017 at 11:34 am

Your understanding of student loans is behind the times. The federal government hasn't guaranteed any privately-issued student loans since June of 2010. That was seven years ago.

This was Obama's great "improvement" to student lending. Cut the bankers out of the loop and have the government issue loans directly. And somehow the total amount of debt being carried by students managed to skyrocket anyway. It actually accelerated . And the government routinely employs debt collection practices (like seizing Social Security checks) that were rightly outlawed in the private sector. Those evil debt-collection companies that you regularly hear about in the news? Hired by our government for purposes of collecting on federal student loans.

Private banks only hold $150 billion out of $1.44 trillion in total student debt. That's barely 10%. Sure, the banks make some profit here. But the bulk of the problem is the federal loans. It's our own government that is crushing an entire generation of students with excess debt.

Eleanor Rigby , June 1, 2017 at 12:21 pm

If I understand correctly, this change was implemented as a part of Obamacare. "We won't know what is in it until we pass it." I wonder what else is in that bill.

Allegorio , June 1, 2017 at 12:38 pm

Your comment does not contradict Hudson's assertion that student debt creates compliant employees, making it difficult to change employment or stand up to employers. Likewise all the surveillance makes people afraid to protest and demonstrate, in case they lose their jobs.

The true evil is compound interest where the interest on a loan far exceeds the original loan. Economic activity increases linearly, interest geometrically. Does risking x dollars entitle you to x^n compensation. It is interesting to note, that in the ancient world the majority of slaves were not due to conquest but default on debt. The revival of slavery and serfdom is an obsession with the .001%ers. No robot can ever match the service of a subjugated human being. This country is ruled by murderers and thieves, sad to say.

Alejandro , June 1, 2017 at 2:50 pm

In this latest mutation, how and who does the loan servicing?

Left in Wisconsin , June 1, 2017 at 3:29 pm

Someone else may know better but I believe the govt hired 4 of the former loan originators/servicers to do all of the servicing nationwide.

Grumpy Engineer , June 1, 2017 at 4:25 pm

The Department of Education has contracted out the loan servicing, a practice that has led to even further abuse of borrowers. I found this list of about a dozen different servicers, but it's from 2013 and is likely out of date:

http://thecollegeinvestor.com/9892/the-complete-list-of-federal-student-loan-servicers/

Sam Adams , June 1, 2017 at 1:21 pm

Uncle Joe Biden.
Contribute to the Joe Biden (student debt peonage fund) 2020 PAC.

Paul art , June 1, 2017 at 3:35 pm

Marvelous hijack of the thread here buddy. Start talking about lousy Government instead of everything else. Brilliant move. You should apply to some Right Wing Think Tanks. I reckon they will pay handsomely for a brain like yours.

PhilM , June 1, 2017 at 6:41 pm

Yeah, buster, don't be going and confusing people with interesting facts and points of view that haven't already been expressed thousands of times! What do you think this is, an anechoic chamber?

djrichard , June 1, 2017 at 11:30 am

the US Department of Education, which issues over 90% of student loans

Usually something like this would trigger hand waving about the Fed Gov crowding out the private sector. But in this case, crickets. I wonder why.

In a related note, presumably any loans issued by the Fed Gov do not actually increase the monetary base. So in a way, the Fed Gov is at cross purposes with the Fed Reserve which is doing everything in its power to create private debt inflation (increase of the monetary base). Banks to indebted students: "wake me up when you paid off Uncle Sam and we can do bidness."

Which triggers my suspicion on why the banks are pro immigration – because I believe immigrants would more or less be free of debt. Banks to themselves: "what's not to love? Oops, I mean give us your down-trodden, your poor".

Lynne , June 1, 2017 at 10:34 am

Today, the debts do not involve liens against crops. People in modern America carry student loans, credit card debt, and mortgages

Hard to say just how angry this makes me. I know most of the county likes to sneer at farmers, even more than others in flyover country. But to read this statement in a supposedly thoughtful article makes my blood boil. Given the vast consolidation in land ownership (Zuckerberg's attempt to strong arm Hawaiians was merely an attempt to follow the example of Ted Turner, after all), and the way Tyson destroyed whole segments of the market, crops are a large lever. Used to be crops and equipment, but John Deere has done its best to make farmers captives as well. But no, they don't exist (except to pay outrageous tuition to ag and vo-tech colleges) and MODERN Americans eat food that springs magically into existence in Trader Joe's. Bah, a plague on their houses. /sarc

Maybe the student loan debtors should start picketing the home of that Democratic hero, Joe Biden. Or take a look at just why post grad tuition has skyrocketed.

Grumpy Engineer , June 1, 2017 at 10:57 am

Why has post-graduate tuition skyrocketed? Because federal loan limits for graduate school are higher:

$57,500 for undergraduates and $138,500 for graduate or professional students, per https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized .

The objective of this game is for schools to extract as much money as possible from the government, with the students being held responsible for paying it back. Higher loan limits are the cause of higher tuition rates, not the effect.

diptherio , June 1, 2017 at 11:21 am

Being from MT and a (one-time) ag family, I hear you on the issue of farmer indebtedness that is a serious problem, as it always has been. I've been hearing forever about the realities of farming - go into debt during planting and hope you get enough at harvest to pay it off and still have a little left over to live on.

However, as you point out, land consolidation by the likes of Cargill and their ilk has greatly reduced the number of family farms and the amount of family farm debt along with it. Total student loan debt right now is over $1.4T, whereas total ag debt is only $395B i.e. there is 4 times as much student loan debt as ag debt.

I'm pretty sure that Hudson wasn't trying to downplay the plight of family farmers in this country, or the crushing amounts of debt that they, individually, often end up taking on. I think he's just pointing out that on the macro-level, student debt has become the main contributor to overall indebtedness (along with mortgages).

Allegorio , June 1, 2017 at 12:49 pm

Not that all that money goes to hiring teaching staff. The majority of courses are taught by poorly paid adjutants and grad students. There is however an ever burgeoning class of college administrators all with six figure incomes pensions and medical care. It is jobs program for the well connected and ethnically privileged. Try getting a job at a university, not if you don't know somebody. The level of corruption at universities is truly astounding. I guess it is par for the course in our mafia culture. Free tuition would certainly increase pressure on cleansing the Stygian Stables, but until the electoral system is reformed and publicly financed there can be no reform of our education system. Finally, I second the emotion, may Joe Biden rot in hell.

shinola , June 1, 2017 at 10:39 am

I am reminded of an old coal miners song:

Ya load 16 tons and what do ya get
Another day older and deeper in debt
St. Peter don't ya call me 'cause I can't go
I owe my soul to the company store

Off The Street , June 1, 2017 at 7:59 pm

I came across the term leet-man the other day. That was in reference to John Locke, yes, that John Locke . He used the term in reference to his work on the South Carolina constitution of a few centuries ago. That was a bad idea then, and has gotten worse in the current context.
Meet the new boss, same as the old boss.

Locke's preamble stated: "that we may avoid erecting a numerous democracy;" Locke's "constitution" established the eight lords proprietors as a hereditary nobility, with absolute control over their serfs, called "leet-men":

"XIX: Any lord of a manor may alienate, sell, or dispose to any other person and his heirs forever, his manor, all entirely together, with all the privileges and leet-men there unto belonging .

"XXII: In every signory, barony and manor, all the leet-men shall be under the jurisdiction of the respective lords of the said signory, barony, or manor, without appeal from him. Nor shall any leet-man, or leet-woman, have liberty to go off from the land of their particular lord, and live anywhere else, without license from their said lord, under hand and seal.

"XXIII: All the children of leet-men shall be leet-men, and so to all generations."

Jesper , June 1, 2017 at 10:42 am

& the risk versus reward is completely skewed . The risk of default is (should be) based on the best credit rating of the borrower or the guarantor. In this case it seems that the risk premium is based on the worst credit rating so difference between risk and reward is completely off.
Personally I'd never ever guarantee someone elses debt – I'd rather borrow the money and lend it myself to whoever wanted me to be guarantor as in effect the risk would be the same as being a guarantor and the costs would be less as the middle man would be cut out.
Therefore I consider this:

banks insisted that the government guarantee all student debt

an unsurprising ask by banks but agreeing to it is idiocy. "Yes we can" does (or should not) mean saying yes to everything
https://en.wikipedia.org/wiki/Barack_Obama_presidential_campaign,_2008#Slogan

Grumpy Engineer , June 1, 2017 at 11:08 am

Aye. Saying "yes" to somebody who wants to borrow $120k for a masters in "motivational speaking" from a crappy knockoff of Trump University isn't exactly doing them a favor. But the US government will do it anyway. They pretty much say "yes" to everything when it comes to student borrowing, regardless of how likely it is that the student will be able to repay.

Assessing a potential borrower's ability to repay (a.k.a., underwriting) and sometimes saying "no" is an important part of lending. Keeps people from getting in over their heads. Well, it used to be. Nobody seems to bother these days. Especially the US government.

Allegorio , June 1, 2017 at 12:53 pm

The point being that the banks and the government want people to get in over their heads to feed the beast and to marginalize them with debt.

PhilM , June 1, 2017 at 6:44 pm

There's another way to look at it. If the government takes on all this debt, then forgives it, hasn't it given a tuition-free education "by the back door"? This could have been an outrageously ingenious move by Obama to slide free education in via the MMT back door.

Yves Smith Post author , June 1, 2017 at 7:20 pm

Coming off as an ideologue isn't a way to persuade people.

No one here likes making students borrow to pay for education. Even the Fed has found tuition subsides will lower default rates. But you don't get what the objective is. It is ostensibly to get more people educated, which of course allows for the continued inflation of college costs.

The Fed article pointed the issue of what the apparent real aims are:

Our results suggest that if the goal of education policy is to improve aggregate welfare, then merit-based tuition subsidies are preferable to both need-based subsidies and higher government borrowing limits, as merit-based subsidies promote college investment without increasing default rates in the student loan market. However, if the goal is to deliver high college enrollment rates, then need-based subsidies are preferable to merit-based subsidies and higher government borrowing limits, but come at the cost of higher default rates on student loans.

https://www.federalreserve.gov/pubs/feds/2014/201466/201466pap.pdf

And the payoff to having a degree is even higher than before given rising income inequality (one of my buddies was just at an investment conference where this was a prominent point made). So if you can't get a college education, you will be left out of what is left of the middle class. But one of many problems is only something like 57% of the students complete their degrees even in 6 years.

http://www.latimes.com/opinion/op-ed/la-oe-mcpherson-complete-college-20160822-snap-story.html

jerry , June 1, 2017 at 10:48 am

Any bankruptcy attorneys out there who can give me a good reason not to declare chapter 7 with 10-15k in unsecured debt, low income, and no medium term (5-10 years) prospects of needing a good credit score? Seems like the only tool left in the toolkit for us wage slaves these days?

LT , June 1, 2017 at 12:07 pm

In the 90s, a radio promotion man from a music label was the first person to explain the the sharecropper analogy to me during a discussion about recording artist contracts. And the internet (or the information people give in service of it) has not changed the dynamic in music or any other industry because it concentrated power and made creditors and credit reporting agencies more powerful.

WeakenedSquire , June 1, 2017 at 12:46 pm

A student loan debt is literally a claim against a life - you cannot discharge it in bankruptcy, and if you die, your parents are obligated to pay it.

No. The second half of that is a flat-out wrong statement. Student loans are discharged upon the borrower's death. Every time I read Hudson, I find myself incredibly frustrated that a man of such brilliance resorts to lazy and hyperbolic exaggerations to make a point when there is no bloody need to do so. Reality is grotesque enough.

JustAnObserver , June 1, 2017 at 1:40 pm

Perhaps Michael Hudson is – somewhat sloppily – referring to the IIRC typical case where getting the loan requires someone to sign on as guarantor, normally the student's parents.

Q for those who know: Am I right in thinking this ?

nycTerrierist , June 1, 2017 at 12:48 pm

As if it isn't bad enough, enter Betsy Devos:

http://www.slate.com/blogs/moneybox/2017/04/18/betsy_devos_is_wasting_no_time_screwing_over_student_borrowers.html

http://www.prwatch.org/news/2017/01/13207/betsy-devos-ethics-report-reveals-ties-student-debt-collection-firm

Gordon , June 1, 2017 at 12:50 pm

Here in the UK today's undergraduates are graduating with a debt in the high £40ks. That is getting on for twice the per capita national debt (around £27k if memory serves) so, given that about half now go to university, that will in time nearly double the national debt – except it will have been privatised so that's ok (/sarc).

Actually, it's not ok. After buying or renting (mostly renting) ridiculously expensive houses and paying off their student loans, today's graduates will not/cannot possibly generate enough economic surplus to pay the pensions of their parents. Somehow/sometime this is going to break.

Wisdom Seeker , June 1, 2017 at 3:16 pm

One aspect of this needs additional consideration: one person's debt is another person's asset. But whose asset? Blaming "rentiers" is insufficiently precise; we ought to know who lent the money. Demand for "bonds" comes from many sources, including retiree pensions, 401Ks, and so on.

Most of the student loans are federally guaranteed, but are the principal and interest payments actually going to Uncle Sam, or to Sallie Mae bond tranche owners? Are the boomers – at least those with pensions and 401ks – enslaving students through their ravenous demand for income-producing assets to fund their retirements?

Most people are blindly funding "life cycle" retirement funds, not realizing that those very "investments" are enabling all the behavior they decry as exploitative. The huge national debt, student loan, housing and auto loan bubbles are all funded by people who think of themselves as "investors", but are actually ENABLERS.

I fear the abuses won't end until people wake up and realize that their 401K retirement fund is abetting all the evils they abhor, and start demanding better investment options. But many simply won't care, and the finance industry will fight tooth and claw to prevent reform of their gravy train

P.S. In past years, when I searched I was not able to easily find a single bond mutual fund or ETF of any size that doesn't fund either the national debt, the TBTF banks, the housing, student loan or auto bubbles. One would think there would be some funds investing in bonds issued by non financial productive corporations; are there any? I would give good coin to a 401K or IRA-compatible fund or ETF which indexed non-financial corporate bonds, especially if it used a socially-responsible overlay to screen out the other forms of corporate abuse (monopolies, pollution, slave-labor practices etc.).

bob , June 1, 2017 at 7:43 pm

Are the boomers – at least those with pensions and 401ks – enslaving students through their ravenous demand for income-producing assets to fund their retirements?

– YES –

VietnamVet , June 1, 2017 at 7:08 pm

Two industries not yet outsourced are education and healthcare. Rural college towns are the only oases of prosperity in mid-America. This article explains why. All the money being spent there is coming from the student's future earnings. It is unsustainable. The percentage of middle class families have fallen from 62% in 1970 to 43% in 2014. This is why government took over student loans. To keep the scam going. Debt that can't be paid back won't be. Healthcare has likewise been finanicizlized. Housing is well into its second bubble blown in part by Chinese flight capital. Something will pop. The prick could be as simple as a successful soft coup by the global media and the intelligence community that forces Donald J Trump to resign.

[Jun 21, 2017] Neoliberalism and opioids abuse

Jun 21, 2017 | economistsview.typepad.com

libezkova, June 21, 2017 at 07:25 PM

Over 33K people in US died of opiates overdoses in 2015 according to the Centers for Disease Control and Prevention.

Not only unemployed abuse opioids, but more and more college students and recent graduates are abusing the opioids as well, according to a survey of 1200 college aged adults commissioned the same year by Christie foundation.

Federal law does not require colleges to report drug death unless they are deemed criminal. But fatal overdoses have been rising at schools nationwide underscoring and horrifying reality of for administrators: in addition to binge drinking and marijuana, they have another crisis firmly entrenched on campus.

Now losing 30K people in one year is like small scale civil war (like the one they have in Ukraine) and in a way it is: war of wealthy and medical industrial complex against those in difficult circumstances, with dreams crashed and, especially, unemployed.

https://www.usnews.com/news/news/articles/2016-06-14/opioids-linked-with-deaths-other-than-overdoses-study-says

== quote ==

CHICAGO (AP) - Accidental overdoses aren't the only deadly risk from using powerful prescription painkillers - the drugs may also contribute to heart-related deaths and other fatalities, new research suggests.

Among more than 45,000 patients in the study, those using opioid painkillers had a 64 percent higher risk of dying within six months of starting treatment compared to patients taking other prescription pain medicine. Unintentional overdoses accounted for about 18 percent of the deaths among opioid users, versus 8 percent of the other patients.

"As bad as people think the problem of opioid use is, it's probably worse," said Wayne Ray, the lead author and a health policy professor at Vanderbilt University's medical school. "They should be a last resort and particular care should be exercised for patients who are at cardiovascular risk."

His caution echoes recent advice from the Centers for Disease Control and Prevention, trying to stem the nation's opioid epidemic. The problem includes abuse of street drugs like heroin and overuse of prescription opioids such as hydrocodone, codeine and morphine.

The drugs can slow breathing and can worsen disrupted breathing that occurs with sleep apnea, potentially leading to irregular heartbeats, heart attacks or sudden death, the study authors said.

In 2014, there were more than 14,000 fatal overdoses linked with the painkillers in the U.S. The study suggests even more have died from causes linked with the drugs, and bolster evidence in previous research linking them with heart problems.

The study involved more than 45,000 adult Medicaid patients in Tennessee from 1999 to 2012. They were prescribed drugs for chronic pain not caused by cancer but from other ailments including persistent backaches and arthritis.

Half received long-acting opioids including controlled-release oxycodone, methadone and fentanyl skin patches. Fentanyl has been implicated in the April death of Prince, although whether the singer was using a fentanyl patch, pills or other form of the drug hasn't been publicly revealed.

Long-acting opioids remain in the body longer. The study authors noted that the body's prolonged exposure to the drugs may increase risks for toxic reactions.

The remaining study patients had prescriptions for non-opioid drugs sometimes used to treat nerve pain, including gabapentin; or certain antidepressants also used for pain.

There were 185 deaths among opioid users, versus 87 among other patients. The researchers calculated that for every 145 patients on an opioid drug, there was one excess death versus deaths among those on other painkillers.

The two groups were similar in age, medical conditions, risks for heart problems and other characteristics that could have contributed to the outcomes.

The results were published Tuesday in the Journal of the American Medical Association .

The study involved only Medicaid patients, who include low-income and disabled adults and who are among groups disproportionately affected by opioid abuse.

Ray noted that the study excluded the sickest patients and those with any evidence of drug abuse. He said similar results would likely be found in other groups.

Dr. Chad Brummett, director of pain research at the University of Michigan Health System, said the study highlights risks from the drugs in a novel way and underscores why their use should be limited.

[Jun 17, 2017] The Collapsing Social Contract by Gaius Publius

Highly recommended!
Notable quotes:
"... Until elites stand down and stop the brutal squeeze , expect more after painful more of this. It's what happens when societies come apart. Unless elites (of both parties) stop the push for "profit before people," policies that dominate the whole of the Neoliberal Era , there are only two outcomes for a nation on this track, each worse than the other. There are only two directions for an increasingly chaotic state to go, chaotic collapse or sufficiently militarized "order" to entirely suppress it. ..."
"... Mes petits sous, mon petit cri de coeur. ..."
"... But the elite aren't going to stand down, whatever that might mean. The elite aren't really the "elite", they are owners and controllers of certain flows of economic activity. We need to call it what it is and actively organize against it. Publius's essay seems too passive at points, too passive voice. (Yes, it's a cry from the heart in a prophetic mode, and on that level, I'm with it.) ..."
"... American Psycho ..."
"... The college students I deal with have internalized a lot of this. In their minds, TINA is reality. Everything balances for the individual on a razor's edge of failure of will or knowledge or hacktivity. It's all personal, almost never collective - it's a failure toward parents or peers or, even more grandly, what success means in America. ..."
"... unions don't matter in our TINA. Corporations do. ..."
"... our system promotes specialists and disregards generalists this leads to a population of individualists who can't see the big picture. ..."
"... That social contract is hard to pin down and define – probably has different meanings to all of us, but you are right, it is breaking down. We no longer feel that our governments are working for us. ..."
"... Increasing population, decreasing resources, increasingly expensive remaining resources on a per unit basis, unresolved trashing of the environment and an political economy that forces people to do more with less all the time (productivity improvement is mandatory, not optional, to handle the exponential function) much pain will happen even if everyone is equal. ..."
"... "Social contract:" nice Enlightment construct, out of University by City. Not a real thing, just a very incomplete shorthand to attempt to fiddle the masses and give a name to meta-livability. ..."
"... Always with the "contract" meme, as if there are no more durable and substantive notions of how humans in small and large groups might organize and interact Or maybe the notion is the best that can be achieved? ..."
"... JTMcFee, you have provided the most important aspect to this mirage of 'social contract'. The "remedies" clearly available to lawless legislation rest outside the realm of a contract which has never existed. ..."
"... Unconscionable clauses are now separately initialed in an "I dare you to sue me" shaming gambit. Meanwhile the mythical Social Contract has been atomized into 7 1/2 billion personal contracts with unstated, shifting remedies wholly tied to the depths of pockets. ..."
"... Here in oh-so-individualistic Chicago, I have been noting the fraying for some time: It isn't just the massacres in the highly segregated black neighborhoods, some of which are now in terminal decline as the inhabitants, justifiably, flee. The typical Chicagoan wanders the streets connected to a phone, so as to avoid eye contact, all the while dressed in what look like castoffs. Meanwhile, Midwesterners, who tend to be heavy, are advertisements for the obesity epidemic: Yet obesity has a metaphorical meaning as the coat of lipids that a person wears to keep the world away. ..."
"... My middle / upper-middle neighborhood is covered with a layer of upper-middle trash: Think Starbucks cups and artisanal beer bottles. ..."
"... The class war continues, and the upper class has won. As commenter relstprof notes, any kind of concerted action is now nearly impossible. Instead of the term "social contract," I might substitute "solidarity." Is there solidarity? No, solidarity was destroyed as a policy of the Reagan administration, as well as by fantasies that Americans are individualistic, and here we are, 40 years later, dealing with the rubble of the Obama administration and the Trump administration. ..."
"... The trash bit has been linked in other countries to how much the general population views the public space/environment as a shared, common good. Thus, streets, parks and public space might be soiled by litter that nobody cares to put away in trash bins properly, while simultaneously the interior of houses/apartments, and attached gardens if any, are kept meticulously clean. ..."
"... The trash bit has been linked in other countries to how much the general population views the public space/environment as a shared, common good. ..."
"... There *is* no public space anymore. Every public good, every public space is now fair game for commercial exploitation. ..."
"... The importance of the end of solidarity – that is, of the almost-murderous impulses by the upper classes to destroy any kind of solidarity. ..."
"... "Conditions will only deteriorate for anyone not in the "1%", with no sight of improvement or relief." ..."
"... "Four Futures" ..."
"... Reminds me of that one quip I saw from a guy who, why he always had to have two pigs to eat up his garbage, said that if he had only one pig, it will eat only when it wants to, but if there were two pigs, each one would eat so the other pig won't get to it first. Our current economic system in a nutshell – pigs eating crap so deny it to others first. "Greed is good". ..."
"... Don't know that the two avenues Gaius mentioned are the only two roads our society can travel. In support of this view, I recall a visit to a secondary city in Russia for a few weeks in the early 1990s after the collapse of the USSR. Those were difficult times economically and psychologically for ordinary citizens of that country. Alcoholism was rampant, emotional illness and suicide rates among men of working age were high, mortality rates generally were rising sharply, and birth rates were falling. Yet the glue of common culture, sovereign currency, language, community, and thoughtful and educated citizens held despite corrupt political leadership, the rise of an oligarchic class, and the related emergence of organized criminal networks. There was also adequate food, and critical public infrastructure was maintained, keeping in mind this was shortly after the Chernobyl disaster. ..."
Jun 16, 2017 | www.nakedcapitalism.com
Yves here. I have been saying for some years that I did not think we would see a revolution, but more and more individuals acting out violently. That's partly the result of how community and social bonds have weakened as a result of neoliberalism but also because the officialdom has effective ways of blocking protests. With the overwhelming majority of people using smartphones, they are constantly surveilled. And the coordinated 17-city paramilitary crackdown on Occupy Wall Street shows how the officialdom moved against non-violent protests. Police have gotten only more military surplus toys since then, and crowd-dispersion technology like sound cannons only continues to advance. The only way a rebellion could succeed would be for it to be truly mass scale (as in over a million people in a single city) or by targeting crucial infrastructure.

By Gaius Publius , a professional writer living on the West Coast of the United States and frequent contributor to DownWithTyranny, digby, Truthout, and Naked Capitalism. Follow him on Twitter @Gaius_Publius , Tumblr and Facebook . GP article archive here . Originally published at DownWithTyranny

"[T]he super-rich are absconding with our wealth, and the plague of inequality continues to grow. An analysis of 2016 data found that the poorest five deciles of the world population own about $410 billion in total wealth. As of June 8, 2017 , the world's richest five men owned over $400 billion in wealth. Thus, on average, each man owns nearly as much as 750 million people."
-Paul Buchheit, Alternet

"Congressman Steve Scalise, Three Others Shot at Alexandria, Virginia, Baseball Field"
-NBC News, June 14, 2017

"4 killed, including gunman, in shooting at UPS facility in San Francisco"
-ABC7News, June 14, 2017

"Seriously? Another multiple shooting? So many guns. So many nut-bars. So many angry nut-bars with guns."
-MarianneW via Twitter

"We live in a world where "multiple dead" in San Francisco shooting can't cut through the news of another shooting in the same day."
-SamT via Twitter

"If the rich are determined to extract the last drop of blood, expect the victims to put up a fuss. And don't expect that fuss to be pretty. I'm not arguing for social war; I'm arguing for justice and peace."
- Yours truly

When the social contract breaks from above, it breaks from below as well.

Until elites stand down and stop the brutal squeeze , expect more after painful more of this. It's what happens when societies come apart. Unless elites (of both parties) stop the push for "profit before people," policies that dominate the whole of the Neoliberal Era , there are only two outcomes for a nation on this track, each worse than the other. There are only two directions for an increasingly chaotic state to go, chaotic collapse or sufficiently militarized "order" to entirely suppress it.

As with the climate, I'm concerned about the short term for sure - the storm that kills this year, the hurricane that kills the next - but I'm also concerned about the longer term as well. If the beatings from "our betters" won't stop until our acceptance of their "serve the rich" policies improves, the beatings will never stop, and both sides will take up the cudgel.

Then where will we be?

America's Most Abundant Manufactured Product May Be Pain

I look out the window and see more and more homeless people, noticeably more than last year and the year before. And they're noticeably scruffier, less "kemp,"​ if that makes sense to you (it does if you live, as I do, in a community that includes a number of them as neighbors).

The squeeze hasn't let up, and those getting squeezed out of society have nowhere to drain to but down - physically, economically, emotionally. The Case-Deaton study speaks volumes to this point. The less fortunate economically are already dying of drugs and despair. If people are killing themselves in increasing numbers, isn't it just remotely maybe possible they'll also aim their anger out as well?

The pot isn't boiling yet - these shootings are random, individualized - but they seem to be piling on top of each other. A hard-boiling, over-flowing pot may not be far behind. That's concerning as well, much moreso than even the random horrid events we recoil at today.

Many More Ways Than One to Be a Denier

My comparison above to the climate problem was deliberate. It's not just the occasional storms we see that matter. It's also that, seen over time, those storms are increasing, marking a trend that matters even more. As with climate, the whole can indeed be greater than its parts. There's more than one way in which to be a denier of change.

These are not just metaphors. The country is already in a pre-revolutionary state ; that's one huge reason people chose Trump over Clinton, and would have chosen Sanders over Trump. The Big Squeeze has to stop, or this will be just the beginning of a long and painful path. We're on a track that nations we have watched - tightly "ordered" states, highly chaotic ones - have trod already. While we look at them in pity, their example stares back at us.

Mes petits sous, mon petit cri de coeur.

elstprof , June 16, 2017 at 3:03 am

But the elite aren't going to stand down, whatever that might mean. The elite aren't really the "elite", they are owners and controllers of certain flows of economic activity. We need to call it what it is and actively organize against it. Publius's essay seems too passive at points, too passive voice. (Yes, it's a cry from the heart in a prophetic mode, and on that level, I'm with it.)

"If people are killing themselves in increasing numbers, isn't it just remotely maybe possible they'll also aim their anger out as well?"

Not necessarily. What Lacan called the "Big Other" is quite powerful. We internalize a lot of socio-economic junk from our cultural inheritance, especially as it's been configured over the last 40 years - our values, our body images, our criteria for judgment, our sense of what material well-being consists, etc. Ellis's American Psycho is the great satire of our time, and this time is not quite over yet. Dismemberment reigns.

The college students I deal with have internalized a lot of this. In their minds, TINA is reality. Everything balances for the individual on a razor's edge of failure of will or knowledge or hacktivity. It's all personal, almost never collective - it's a failure toward parents or peers or, even more grandly, what success means in America.

The idea that agency could be a collective action of a union for a strike isn't even on the horizon. And at the same time, these same students don't bat an eye at socialism. They're willing to listen.

But unions don't matter in our TINA. Corporations do.

Moneta , June 16, 2017 at 8:08 am

Most of the elite do not understand the money system. They do not understand how different sectors have benefitted from policies and/or subsidies that increased the money flows into these. So they think they deserve their money more than those who toiled in sectors with less support.

Furthermore, our system promotes specialists and disregards generalists this leads to a population of individualists who can't see the big picture.

jefemt , June 16, 2017 at 9:45 am

BAU, TINA, BAU!! BOHICA!!!

Dead Dog , June 16, 2017 at 3:09 am

Thank you Gaius, a thoughtful post. That social contract is hard to pin down and define – probably has different meanings to all of us, but you are right, it is breaking down. We no longer feel that our governments are working for us.

Of tangential interest, Turnbull has just announced another gun amnesty targeting guns that people no longer need and a tightening of some of the ownership laws.

RWood , June 16, 2017 at 12:24 pm

So this inheritance matures: http://www.nature.com/news/fight-the-silencing-of-gun-research-1.22139

willem , June 16, 2017 at 2:20 pm

One problem is the use of the term "social contract", implying that there is some kind of agreement ( = consensus) on what that is. I don't remember signing any "contract".

Fiery Hunt , June 16, 2017 at 3:17 am

I fear for my friends, I fear for my family. They do not know how ravenous the hounds behind nor ahead are. For myself? I imagine myself the same in a Mad Max world. It will be more clear, and perception shattering, to most whose lives allow the ignoring of gradual chokeholds, be them political or economic, but those of us who struggle daily, yearly, decadely with both, will only say Welcome to the party, pals.

Disturbed Voter , June 16, 2017 at 6:33 am

Increasing population, decreasing resources, increasingly expensive remaining resources on a per unit basis, unresolved trashing of the environment and an political economy that forces people to do more with less all the time (productivity improvement is mandatory, not optional, to handle the exponential function) much pain will happen even if everyone is equal.

Each person does what is right in their own eyes, but the net effect is impoverishment and destruction. Life is unfair, indeed. A social contract is a mutual suicide pact, whether you renegotiate it or not. This is Fight Club. The first rule of Fight Club, is we don't speak of Fight Club. Go to the gym, toughen up, while you still can.

JTMcPhee , June 16, 2017 at 6:44 am

"Social contract:" nice Enlightment construct, out of University by City. Not a real thing, just a very incomplete shorthand to attempt to fiddle the masses and give a name to meta-livability.

Always with the "contract" meme, as if there are no more durable and substantive notions of how humans in small and large groups might organize and interact Or maybe the notion is the best that can be achieved? Recalling that as my Contracts professor in law school emphasized over and over, in "contracts" there are no rights in the absence of effective remedies. It being a Boston law school, the notion was echoed in Torts, and in Commercial Paper and Sales and, tellingly, in Constitutional Law and Federal Jurisdiction, and even in Criminal Law and Criminal Procedure. No remedy, no right. What remedies are there in "the system," for the "other halves" of the "social contract," the "have-naught" halves?

When honest "remedies under law" become nugatory, there's always the recourse to direct action of course with zero guarantee of redress

sierra7 , June 16, 2017 at 11:22 am

"What remedies are there in "the system," for the "other halves" of the "social contract," the "have-naught" halves?" Ah yes the ultimate remedy is outright rebellion against the highest authorities .with as you say, " zero guarantee of redress."

But, history teaches us that that path will be taken ..the streets. It doesn't (didn't) take a genius to see what was coming back in the late 1960's on .regarding the beginnings of the revolt(s) by big money against organized labor. Having been very involved in observing, studying and actually active in certain groups back then, the US was acting out in other countries particularly in the Southern Hemisphere, against any social progression, repressing, arresting (thru its surrogates) torturing, killing any individuals or groups that opposed that infamous theory of "free market capitalism". It had a very definite "creep" effect, northwards to the mainstream US because so many of our major corporations were deeply involved with our covert intelligence operatives and objectives (along with USAID and NED). I used to tell my friends about what was happening and they would look at me as if I was a lunatic. The agency for change would be "organized labor", but now, today that agency has been trashed enough where so many of the young have no clue as to what it all means. The ultimate agenda along with "globalization" is the complete repression of any opposition to the " spread of money markets" around the world". The US intends to lead; whether the US citizenry does is another matter. Hence the streets.

Kuhio Kane , June 16, 2017 at 12:33 pm

JTMcFee, you have provided the most important aspect to this mirage of 'social contract'. The "remedies" clearly available to lawless legislation rest outside the realm of a contract which has never existed.

bdy , June 16, 2017 at 1:32 pm

The Social Contract, ephemeral, reflects perfectly what contracts have become. Older rulings frequently labeled clauses unconscionable - a tacit recognition that so few of the darn things are actually agreed upon. Rather, a party with resources, options and security imposes the agreement on a party in some form of crisis (nowadays the ever present crisis of paycheck to paycheck living – or worse). Never mind informational asymmetries, necessity drives us into crappy rental agreements and debt promises with eyes wide open. And suddenly we're all agents of the state.

Unconscionable clauses are now separately initialed in an "I dare you to sue me" shaming gambit. Meanwhile the mythical Social Contract has been atomized into 7 1/2 billion personal contracts with unstated, shifting remedies wholly tied to the depths of pockets.

Solidarity, of course. Hard when Identity politics lubricate a labor market that insists on specialization, and talented children of privilege somehow manage to navigate the new entrepreneurism while talented others look on in frustration. The resistance insists on being leaderless (fueled in part IMHO by the uncomfortable fact that effective leaders are regularly killed or co-opted). And the overriding message of resistance is negative: "Stop it!"

But that's where we are. Again, just my opinion: but the pivotal step away from the jackpot is to convince or coerce our wealthiest not to cash in. Stop making and saving so much stinking money, y'all.

Moneta , June 16, 2017 at 6:54 am

The pension system is based on profits. Nothing will change until the profits disappear and the top quintile starts falling off the treadmill.

Susan the other , June 16, 2017 at 1:01 pm

and there's the Karma bec. even now we see a private banking system synthesizing an economy to maintain asset values and profits and they have the nerve to blame it on social spending. I think Giaus's term 'Denier' is perfect for all those vested practitioners of profit-capitalism at any cost. They've already failed miserably. For the most part they're just too proud to admit it and, naturally, they wanna hang on to "their" money. I don't think it will take a revolution – in fact it would be better if no chaos ensued – just let these arrogant goofballs stew in their own juice a while longer. They are killing themselves.

roadrider , June 16, 2017 at 8:33 am

There's a social contract? Who knew?

Realist , June 16, 2017 at 8:41 am

When I hear so much impatient and irritable complaint, so much readiness to replace what we have by guardians for us all, those supermen, evoked somewhere from the clouds, whom none have seen and none are ready to name, I lapse into a dream, as it were. I see children playing on the grass; their voices are shrill and discordant as children's are; they are restive and quarrelsome; they cannot agree to any common plan; their play annoys them; it goes poorly. And one says, let us make Jack the master; Jack knows all about it; Jack will tell us what each is to do and we shall all agree. But Jack is like all the rest; Helen is discontented with her part and Henry with his, and soon they fall again into their old state. No, the children must learn to play by themselves; there is no Jack the master. And in the end slowly and with infinite disappointment they do learn a little; they learn to forbear, to reckon with another, accept a little where they wanted much, to live and let live, to yield when they must yield; perhaps, we may hope, not to take all they can. But the condition is that they shall be willing at least to listen to one another, to get the habit of pooling their wishes. Somehow or other they must do this, if the play is to go on; maybe it will not, but there is no Jack, in or out of the box, who can come to straighten the game. -Learned Hand

DJG , June 16, 2017 at 9:24 am

Here in oh-so-individualistic Chicago, I have been noting the fraying for some time: It isn't just the massacres in the highly segregated black neighborhoods, some of which are now in terminal decline as the inhabitants, justifiably, flee. The typical Chicagoan wanders the streets connected to a phone, so as to avoid eye contact, all the while dressed in what look like castoffs. Meanwhile, Midwesterners, who tend to be heavy, are advertisements for the obesity epidemic: Yet obesity has a metaphorical meaning as the coat of lipids that a person wears to keep the world away.

My middle / upper-middle neighborhood is covered with a layer of upper-middle trash: Think Starbucks cups and artisanal beer bottles. Some trash is carefully posed: Cups with straws on windsills, awaiting the Paris Agreement Pixie, who will clean up after these oh-so-earnest environmentalists.

Meanwhile, I just got a message from my car-share service: They are cutting back on the number of cars on offer. Too much vandalism.

Are these things caused by pressure from above? Yes, in part: The class war continues, and the upper class has won. As commenter relstprof notes, any kind of concerted action is now nearly impossible. Instead of the term "social contract," I might substitute "solidarity." Is there solidarity? No, solidarity was destroyed as a policy of the Reagan administration, as well as by fantasies that Americans are individualistic, and here we are, 40 years later, dealing with the rubble of the Obama administration and the Trump administration.

JEHR , June 16, 2017 at 11:17 am

DJG: My middle / upper-middle neighborhood is covered with a layer of upper-middle trash: Think Starbucks cups and artisanal beer bottles. Some trash is carefully posed: Cups with straws on windsills, awaiting the Paris Agreement Pixie, who will clean up after these oh-so-earnest environmentalists.

Yes, the trash bit is hard to understand. What does it stand for? Does it mean, We can infinitely disregard our surroundings by throwing away plastic, cardboard, metal and paper and nothing will happen? Does it mean, There is more where that came from! Does it mean, I don't care a fig for the earth? Does it mean, Human beings are stupid and, unlike pigs, mess up their immediate environment and move on? Does it mean, Nothing–that we are just nihilists waiting to die? I am so fed up with the garbage strewn on the roads and in the woods where I live; I used to pick it up and could collect as much as 9 garbage bags of junk in 9 days during a 4 kilometer walk. I don't pick up any more because I am 77 and cannot keep doing it.

However, I am certain that strewn garbage will surely be the last national flag waving in the breeze as the anthem plays junk music and we all succumb to our terrible future.

jrs , June 16, 2017 at 1:09 pm

Related to this, I thought one day of who probably NEVER gets any appreciation but strives to make things nicer, anyone planning or planting the highway strips (government workers maybe although it could be convicts also unfortunately, I'm not sure). Yes highways are ugly, yes they will destroy the world, but some of the planting strips are sometimes genuinely nice. So they add some niceness to the ugly and people still litter of course.

visitor , June 16, 2017 at 1:04 pm

The trash bit has been linked in other countries to how much the general population views the public space/environment as a shared, common good. Thus, streets, parks and public space might be soiled by litter that nobody cares to put away in trash bins properly, while simultaneously the interior of houses/apartments, and attached gardens if any, are kept meticulously clean.

Basically, the world people care about stops outside their dwellings, because they do not feel it is "theirs" or that they participate in its possession in a genuine way. It belongs to the "town administration", or to a "private corporation", or to the "government" - and if they feel they have no say in the ownership, management, regulation and benefits thereof, why should they care? Let the town administration/government/corporation do the clean-up - we already pay enough taxes/fees/tolls, and "they" are always putting up more restrictions on how to use everything, so

In conclusion: the phenomenon of litter/trash is another manifestation of a fraying social contract.

Big River Bandido , June 16, 2017 at 1:47 pm

The trash bit has been linked in other countries to how much the general population views the public space/environment as a shared, common good.

There *is* no public space anymore. Every public good, every public space is now fair game for commercial exploitation.

I live in NYC, and just yesterday as I attempted to refill my MetroCard, the machine told me it was expired and I had to replace it. The replacement card doesn't look at all like a MetroCard with the familiar yellow and black graphic saying "MetroCard". Instead? It's an ad. For a fucking insurance company. And so now, every single time that I go somewhere on the subway, I have to see an ad from Empire Blue Cross/Blue Shield.

visitor , June 16, 2017 at 2:39 pm

There *is* no public space anymore. Every public good, every public space is now fair game for commercial exploitation.

And as a result, people no longer care about it - they do not feel it is their commonwealth any longer.

Did you notice whether the NYC subway got increasingly dirty/littered as the tentacles of privatization reached everywhere? Just curious.

DJG , June 16, 2017 at 9:37 am

The importance of the end of solidarity – that is, of the almost-murderous impulses by the upper classes to destroy any kind of solidarity. From Yves's posting of Yanis Varoufakis's analysis of the newest terms of the continuing destruction of Greece:

With regard to labour market reforms, the Eurogroup welcomes the adopted legislation safeguarding previous reforms on collective bargaining and bringing collective dismissals in line with best EU practices.

I see! "Safeguarding previous reforms on collective bargaining" refers, of course, to the 2012 removal of the right to collective bargaining and the end to trades union representation for each and every Greek worker. Our government was elected in January 2015 with an express mandate to restore these workers' and trades unions' rights. Prime Minister Tsipras has repeatedly pledged to do so, even after our falling out and my resignation in July 2015. Now, yesterday, his government consented to this piece of Eurogroup triumphalism that celebrates the 'safeguarding' of the 2012 'reforms'. In short, the SYRIZA government has capitulated on this issue too: Workers' and trades' unions' rights will not be restored. And, as if that were not bad enough, "collective dismissals" will be brought "in line with best EU practices". What this means is that the last remaining constraints on corporations, i.e. a restriction on what percentage of workers can be fired each month, is relaxed. Make no mistake: The Eurogroup is telling us that, now that employers are guaranteed the absence of trades unions, and the right to fire more workers, growth enhancement will follow suit! Let's not hold our breath!

Daniel F. , June 16, 2017 at 10:44 am

The so-called "Elites"? Stand down? Right. Every year I look up the cardinal topics discussed at the larger economic forums and conferences (mainly Davos and G8), and some variation of "The consequences of rising inequality" is a recurring one. Despite this, nothing ever comes out if them. I imagine they go something like this:

A wet dream come true, both for an AnCap and a communist conspiracy theorist. I'm by no means either. However, I think capitalism has already failed and can't go on for much longer. Conditions will only deteriorate for anyone not in the "1%", with no sight of improvement or relief.

I'd very much like to be proven wrong.

Bobby Gladd , June 16, 2017 at 12:01 pm

"Conditions will only deteriorate for anyone not in the "1%", with no sight of improvement or relief." Frase's Quadrant Four. Hierarchy + Scarcity = Exterminism (From "Four Futures" )

Archangel , June 16, 2017 at 11:33 am

Reminds me of that one quip I saw from a guy who, why he always had to have two pigs to eat up his garbage, said that if he had only one pig, it will eat only when it wants to, but if there were two pigs, each one would eat so the other pig won't get to it first. Our current economic system in a nutshell – pigs eating crap so deny it to others first. "Greed is good".

oh , June 16, 2017 at 12:10 pm

Our country is rife with rent seeking pigs who will stoop lower and lower to feed their greed.

Vatch , June 16, 2017 at 12:37 pm

In today's Links section there's this: https://www.theguardian.com/inequality/2017/jun/14/tax-evaders-exposed-why-super-rich-are-even-richer-than-we-thought which has relevance for the discussion of the collapsing social contract.

Chauncey Gardiner , June 16, 2017 at 1:00 pm

Don't know that the two avenues Gaius mentioned are the only two roads our society can travel. In support of this view, I recall a visit to a secondary city in Russia for a few weeks in the early 1990s after the collapse of the USSR. Those were difficult times economically and psychologically for ordinary citizens of that country. Alcoholism was rampant, emotional illness and suicide rates among men of working age were high, mortality rates generally were rising sharply, and birth rates were falling. Yet the glue of common culture, sovereign currency, language, community, and thoughtful and educated citizens held despite corrupt political leadership, the rise of an oligarchic class, and the related emergence of organized criminal networks. There was also adequate food, and critical public infrastructure was maintained, keeping in mind this was shortly after the Chernobyl disaster.

Here in the US the New Deal and other legislation helped preserve social order in the 1930s. Yves also raises an important point in her preface that can provide support for the center by those who are able to do so under the current economic framework. That glue is to participate in one's community; whether it is volunteering at a school, the local food bank, community-oriented social clubs, or in a multitude of other ways; regardless of whether your community is a small town or a large city.

JTMcPhee , June 16, 2017 at 1:21 pm

" Yet the glue of common culture, sovereign currency, language, community, and thoughtful and educated citizens held despite corrupt political leadership, the rise of an oligarchic class, and the related emergence of organized criminal networks."

None of which applies to the Imperium, of course. There's glue, all right, but it's the kind that is used for flooring in Roach Motels (TM), and those horrific rat and mouse traps that stick the rodent to a large rectangle of plastic, where they die eventually of exhaustion and dehydration and starvation The rat can gnaw off a leg that's glued down, but then it tips over and gets glued down by the chest or face or butt

I have to note that several people I know are fastidious about picking up trash other people "throw away." I do it, when I'm up to bending over. I used to be rude about it - one young attractive woman dumped a McDonald's bag and her ashtray out the window of her car at one of our very long Florida traffic lights. I got out of my car, used the mouth of the McDonald's bag to scoop up most of the lipsticked butts, and threw them back into her car. Speaking of mouths, that woman with the artfully painted lips sure had one on her

[Jun 13, 2017] Education Failure is the New Success

Jun 13, 2017 | www.unz.com

Happily, an alternative exists to the billion dollar "don't blame kids" approach, one that has historically proven itself and will cost far less than $16,000 per pupil to impart adequate academic skills. It is simple: pressure laggards to shape up and punish those who disrupt the learning of classmates. Just return to an earlier era when students themselves were held responsible for learning their lessons.

Junk the Rousseauian fantasy that children naturally have a thirst for acquiring knowledge so "educators" need only let nature take its course. Yes, Homo sapiens relish learning, but youngsters are not innately disposed to sit quietly for long periods and dutifully suffer failure. Learning may be natural; schooling is not. The corollary is that school for the cognitively weak will be the most painful. Thus, for many African Americans cultivating self-esteem is anathema to academic achievement.

Fortunately, the repertoire to impose this necessary discipline is well-known and requires only modest skill to implement. High-priced rocket science it is not. This is almost forgotten educational world of shame, stigma, humiliation, dunce caps, browbeating even corporal punishment where teachers forcefully exert authority over the little savages who refuse to learn while impeding the progress of others. Further require teachers to impose clear, grammatically correct English to those with slurred speech and reflexively use profanity. If the teacher's efforts fail, the little miscreants can immediately be sent out for discipline to be monitored by a wicked witch. Conceivably, some retired discipline-skilled Nuns from Catholic schools or a retired Marine drill sergeant could offer three-day workshops on how to manage the classroom

Students can practice sitting still and being quiet for longer and longer times, marching in step when changing classes, mastering polite conversation when addressing authority figures ("Thank you Mr. Smith" not 'hey teach'") memorizing famous orations, and build the habits of punctuality, restraint and patience.

Anonymous June 13, 2017 at 9:06 am GMT

Cheapest offer of "Bad Students, Not Bad Schools "
by Robert Weissberg, used,
is $ 46.00 + $ 3.99 S&H, is

https://www.amazon.com/dp/141281345X/?tag=unco037-20

AngloBerserkerJew , June 13, 2017 at 12:25 pm GMT

I run a large AP program in a what is euphemistically called a "priority" neighbourhood in a major Canadian city. Although most of our students are East Asian and South Asian and come from outside our catchment area, the majority of the local community is black.

After twenty years of our program offering completely subsidized AP exams, after-class tutorials, and massive promotion efforts emphasizing the advantages of taking AP directed to our black students, still less that 5% of the population of our AP classes consists of blacks.

And we have never had a black AP National Scholar. Not one. The local school board would LOVE to see such an event, and I can't imagine it ever happening

Dr. X , June 13, 2017 at 12:58 pm GMT

Are you suggesting that our alien, Third-World, clan-based minority populations adopt the values of discipline, accountability, punctuality, and rule-following typical of the majority's beyond-kin, altruistic-based culture from northern Europe in the hope of achieving similar social, academic, technical, and economic outcomes?

There's an extent to which this does work. Parochial schools with strict discipline policies have always gotten more out of black students than public schools. African students, who do not typically have a race card to play and are products of Euro-colonial school systems, in my experience are nearly always better students than black Americans.

Imagine a Venn diagram, in which one circle represents cognitive ability (IQ) and the other circle represents discipline and culture. The overlapping area represents "educational achievement." The overall black cognitive ability circle, by itself, will always be smaller than a corresponding white circle, but it is possible to gain more achievement with more structure and discipline. There is a limit to how far you can go with this approach, but you can make some gains.

Of course, public schools and colleges practically kiss blacks on the ass for misbehavior rather than discipline them. Blacks are fully aware that the black teachers and administrators are incompetent frauds, that liberal whites are easily pushed around or manipulated, that they can always play the "racism" card, and that Afrocentric curricula is pure bullshit and that it was the white man who invented their iPhones, space flight, etc.

One aspect of the black personality is that blacks respond to, and generally respect, a show a force. You see this in sports, for instance, in prison, and the military. Some of the most competent and useful blacks you will encounter are in the military, where there is a set of expectations, a white chain of command, and punishment for failure.

Blacks wouldn't necessarily become geniuses if you applied a military structure to education, but you'd see some improvement.

Agent76 , June 13, 2017 at 1:08 pm GMT

Jan 23, 2017 Why Good Teachers Want School Choice

Can every child receive a good education? With school choice and competition, yes. The problem? Powerful teachers unions oppose school choice. Rebecca Friedrichs, a public school teacher who took her case against the teachers union all the way to the Supreme Court, explains why school choice is the right choice.

https://youtu.be/PnQu8iRiVYU

Diversity Heretic , June 13, 2017 at 1:22 pm GMT

@Njguy73 There's no need to racially segregate schools. The solution has already been implemented. It's called having a school district where the housing prices do the discrimination, so the schools don't have to. An awfully expensive solution that consigns white working class children to the tender mercies of the snarling black underclass.

anon , June 13, 2017 at 1:23 pm GMT

The plight of black students in black schools became especially dire when the education establishment and the media pulled a slight of hand and started labeling lazy ( a personal fault) students as unmotivated (and therefore the fault of society not motivating them.)

What hasn't been pointed out is while public schools in poor areas have been failing for decades, Catholic schools located in the same areas have continued to turn out hundred of thousands of literate, well behaved black students.

The real tragedy is that these very productive ghetto Catholics schools have been closing at an increasing rate despite their successes because of economic problems. Vouchers would help them to stay open,

THE ACLU however, would make sure that they wouldn't get them.

Simon in London , June 13, 2017 at 2:49 pm GMT

I'm always impressed by the quality of my black African postgrad students, who mostly come from lower middle/upper working class backgrounds in cities like Laos. They are clearly decently educated, by methods the exact opposite of what is advocated in the USA – strict discipline, uniforms, regulation, a decent amount of rote memorisation (but not the passivity of the Middle East/South Asia).

US educationists could learn a lot from Nigeria, or even Jamaica, but are clearly far too arrogant to do so.

Greg Schofield , June 14, 2017 at 12:13 am GMT

I am an old Australian teacher, run out of my profession by managers embracing the American system of de-education.

Your understanding of education is deplorable, and the results of it are horrific, here are a few points that should be carefully considered together.

[Hide MORE]

IQ tests are nonsense.

Testing and teaching are incompatible to one another, less tests and more teaching.

Primary school is NOT the most important time, a few essential skills, a wide and rambling exposure to general knowledge, and some actual fun will do.

Primary school should produce a student capable of writing coherent sentences, reading 80-120 words per minute (well written texts only with unusual words), general knowledge of science, the general framework of modern world history, and enough maths to do simple algebra - anything more is a bonus, but not essential to secondary school.

Secondary school is the secondary level of knowledge - it has nothing much in common with Primary education.

Secondary school is about the development of concepts in different subjects - and the study of literature (a self-contained concept), is foundational to all the other higher subjects.

Literature is about concepts, not morals, slogans, good behaviour or anything else. They are complete, honest works supremely well written world view of the author. The quality of literature is it most important feature - the best and only the best.

The conceptual integrity of literature, not a particular style of language is critical. Literature should not be chosen because it is reverent, but because it is good and great. Confession I hate reading Jane Austin, a girly book of all girly books, but when I finish her work I understand the world were being good is not just a virtue, but an aspiration. For many reasons she was one of the most read authors in the trenches of World War I.

The quality of text books (books of text not pictures) is ESSENTIAL there is no choice in this, no leeway. They must be coherent, the work of the best minds in the subject, comprehensive, and clearly written - only a true expert can make things simple without also making it stupid.

Text books of quality do not have to be up-to-date, but they have to be conceptually complete and clear - a good textbook is not necessarily a recent one.

Textbooks are the last resort, which is the reason they have to be good - it is where the student goes to understand what they do not understand - that is always hard and they need a reliable source material - only the best textbooks will do.

Textbooks are not teaching material, they are reference material.

Standard tests are rubbish, written examinations twice a year are best - this is why text books are important - hitting the books is not easy, I say it again, they therefore need to be the very best - not the normal US textbook - which is CRAP.

The best mark of a substantial work should be the grade, not the average mark - students who learn have to be brave and need to push things - a good student tries and fails long before they try and succeed (the order is sometimes in the reverse).

A student's progress is marked by their best mark, their highest achievement that counts, all the rest are run-offs. A student can be lazy, a student might rest on their laurels, that does not matter, what they achieved, not how they went about it is what examination should do.

It does not matter what a teacher is called by students, but that teacher actually knows their area, is enthusiastic about their knowledge, is supported by the school, encouraged to do more and occasionally make mistakes in trying.

Micro-management, in fact management in general, and good teaching are incompatible.

School discipline is simple and only breaks down because of mismanagement.

Heads and deputies are not there to attend meetings, they must be seen, patrol the halls, greet the students and be known.

Teachers need only have a disruptive student leave the class room and stand in the hall. The deputies need to take them to detention where they sit and do nothing until the next lesson.

Do not trap students behind files of bad behaviour. Boys especially do stupid things, often and repeatedly, only the mean acts should be recorded in detail.

Stop trying to get kids to apologise, girls will do it, and the better boys won't.

Make sure the kids get food, and have fun exercise (competitive sport should be an elective).

Running education is not hard, the fundamentals have been known for hundreds of years. What exists now has been made, it is a policy of de-education and it is working all too well.

[Jun 12, 2017] 5 Questions Universities Must Answer after the Duke Divinity Controversy

If diversity represents sort of "reverse racial discrimination", academic achievements be damned?
Notable quotes:
"... is the notion of "diversity" that is being aimed at supposed to replicate among faculty the current demographic breakdown of our country as a whole? ..."
"... Conversely, if the goal of diversity is compensatory, i.e., seeks to make up for past social injustices and the demographic disequilibrium they have produced, then here too we must be explicit about the point of reference that is to guide our remedial efforts. ..."
"... is diversity pursued under that principle to amount to a retroactive balancing of sorts, an open-ended institutional "reparation" for past injustices and inequities? ..."
"... Leaving aside logistical difficulties, to which one may certainly be sympathetic, why exclude any number of other descriptors from our conception of diversity, such as social class, ethnic background, veteran status, political views, religious belief, childhood trauma, aesthetic preferences, dietary philosophy, dance and gardening skills, past struggles with mental disability, etc.? ..."
"... 'Diversity' was always at best a racket and at worst a knowing stage – a mere stage – in the war to replace Western Civilization. ..."
Jun 12, 2017 | www.theamericanconservative.com

The recent controversy surrounding my colleague and friend, Paul Griffiths, Warren Professor of Catholic Theology in the Duke Divinity School (DDS), has been widely covered. Countless op-ed pieces, fueled by Rod Dreher's online publication of internal memos and public emails at The American Conservative , as well as prominent editorials in the Wall Street Journal and the New York Times , have reached many readers.

... ... ...

Unfortunately, that dialogue remains more elusive than ever. Instead, for quite some time now, the word "diversity" has served two distinct and equally problematic purposes: the magical and the litigious. Some university administrators, particularly those less loyal to the job they have than to the one they covet next, have embraced "diversity" as a professional talisman of sorts, a term that, if wielded frequently and with conspicuous reverence, will magically unlock doors higher up on the professional ladder. Conversely, to faculty members craving moral ascendancy over colleagues whose superior achievements they may regard with a mix of dread, inadequacy and envy, there is no more powerful weapon than to charge the target of their resentment with opposition to diversity, which in the present order of opportune allegations ranks just below that of the child molester. To put it in Platonic terms, contemporary academia has been mirroring our country's deteriorating civic discourse by supplanting knowledge with opinion, and by weaponizing our opinions, rather than understanding them as something for which we bear great responsibility.

1) Is the notion of "diversity" to be understood as a mimetic or compensatory endeavor? That is, is the notion of "diversity" that is being aimed at supposed to replicate among faculty the current demographic breakdown of our country as a whole? Or is the objective to compensate for the extreme dominance of a certain type of faculty-white, Caucasian, male, and (putatively) heterosexual-as it undeniably prevailed well into the 1990s at many institutions of higher learning?

2) Supposing, then, that higher education understands itself to be committed to a mimetic conception of diversity, then what is to serve as our point of reference? Is diversity, as currently affirmed by institutions of higher education, to be modeled on the overall demographic breakdown of the population in the United States-say, as captured by the most recent national census? Or is the university's conception of diversity aimed at some other norm of proportionate representation of minorities, say, one prevalent in academia as a whole or as endemic to specific disciplines?

3) Conversely, if the goal of diversity is compensatory, i.e., seeks to make up for past social injustices and the demographic disequilibrium they have produced, then here too we must be explicit about the point of reference that is to guide our remedial efforts. Is the objective to compensate for a historical lack of diversity that for many decades prevailed inside the academy? And, if so, is diversity pursued under that principle to amount to a retroactive balancing of sorts, an open-ended institutional "reparation" for past injustices and inequities? Here it ought to be kept in mind that, to cast the matter in sacramental terms, there can be no atonement without forgiveness. Hence, if diversity is understood as compensation, then not only must past wrongs in this regard be clearly identified, but any institutional acknowledgment of past injustice must also be met by, and conclude with, an act of comprehensive forgiveness. Otherwise, institutions would remain forever caught up in a downward spiral of moral recrimination and self-abasement, respectively.

4) Assuming that these questions can be openly deliberated and satisfactorily answered (which in the present climate is to assume a great deal indeed), more intractable issues yet will arise. For regardless of whether the modern research university opts for a mimetic or compensatory approach to diversity, it is by definition an inherently selective, elite institution. Thus, one must wonder whether institutions of higher education can balance their highly selective practices of faculty recruitment-practices directly related to the goal of the university as such, viz., advancing knowledge-with a demographically representative notion of "diversity" such as it exists outside of academia?

5) Finally, we should ask why currently prevailing assumptions and practices concerning "diversity" are conceived in such peculiarly narrow, not to say non-diverse ways. We know that empirical demographic studies, including the national census conducted by the U.S. government every decade or so, rely on many categories and descriptors and, consequently, yield a far more inflected and robust conception of our society's diverse composition. That being so, what justifies higher education's conception of "faculty diversity" being mainly restricted to the categories of race and gender? Leaving aside logistical difficulties, to which one may certainly be sympathetic, why exclude any number of other descriptors from our conception of diversity, such as social class, ethnic background, veteran status, political views, religious belief, childhood trauma, aesthetic preferences, dietary philosophy, dance and gardening skills, past struggles with mental disability, etc.?


connecticut farmer, says: June 12, 2017 at 8:18 am

Notwithstanding my agreement with the author, this article is very poorly written and filled with academic jargon, each sentence representing the very antithesis of Churchill's observation that there is nothing more powerful in the English language than a simple, objective sentence.

G Harvey , says: June 12, 2017 at 10:12 am

"'Diversity' is turning into idolatrous worship of empty notions"

The above statement is false because the verb tense is wrong. This is not something new. 'Diversity' was always at best a racket and at worst a knowing stage – a mere stage – in the war to replace Western Civilization.

Professor Pfau: Did you stand up and defend the Duke lacrosse team and its head coach? Did you condemn colleagues such as Leftist Houston Baker.

[Jun 12, 2017] How useful is the word inequality ? not much as it is use as a typical sponge word like poor incread of low waged or underpaid

Mar 31, 2017 | economistsview.typepad.com
Paine, March 29, 2017 at 02:43 PM
How useful is the word inequality ? typical sponge word like " poor " when u mean low waged

Or "middle class " when you mean high waged

The shares in GDP are zero sum at any one point in time


If the bottom wage rises fastest with some arrangement of wages
That ought to look preferred to anyone without any sense of where they'd land

Paine -> Paine ... , March 29, 2017 at 02:49 PM
Of course this is if your frame is the individual
and here's only a wage earning class
No exploiters allowed M

But if the exploiters arrive with their rag tag of proprietary types trailing them ?

Turn to a Class frame ?


Maximize the share of your class

Maximally unequal
Ie class dictatorship


Equality before the law

Equality in the voting booth
These are very different dimensions of social being
From equality of income

Income ...another sponge word M

libezkova -> Paine ... , March 29, 2017 at 07:06 PM
"like " poor "
when u mean low waged"

Distortion of the language is the main tool of neoliberalism.

the key to neoliberal propaganda.

Very similar to Bolshevism in this respect.

[Jun 09, 2017] A big reason Corbyn's a commie is because he wants to abolish tuition to bring the UK back to its communist past of 1997 and give young people the same deal all the people in charge had

Notable quotes:
"... Tutition used to be free in the UK. Then they decided that those lazy students needed to have some skin in the game and suddenly tuition was 1000 pounds. Then a few years later it was 9000 pounds and all the college grads there now have US-level student debt. ..."
"... A big reason Corbyn's a commie is because he wants to abolish tuition to bring the UK back to its communist past of 1997 and give young people the same deal all the people in charge had. ..."
Jun 09, 2017 | economistsview.typepad.com
Christopher H., June 09, 2017 at 01:35 PM
Oh look, Atrios blogged something. I guess he didn't get the memo from PGL and the establishment Democrats.

http://www.eschatonblog.com/2017/06/the-kids-are-alright.html

FRIDAY, JUNE 09, 2017

The Kids Are Alright

No actual figures, but presumably there was big yute turnout in the UK Everyone will now claim that a non-commie Labour leader like that nice Ed Miliband would OF COURSE have done as well as Joseph Stalin Lenin Marx Corbyn, and in fact BETTER, but that's bullshit.

That nice Ed Miliband couldn't do in 2015, and I'm not sure who the "unnamed generic normal Labour candidate" would otherwise be. Theresa May's incompetent evil helped, but Corbyn staved off what was supposed to have been a Labour extinction election and while there will still likely be a Tory-led government, it will be pretty fragile. A coalition with a bunch of bigoted religious nutters from Northern Ireland who aren't on board with May's Brexit plans.

Labour went after The Kids Today and got them to the polls. Wasn't enough to win, but the polling outfit predicting a likely hung parliament was considered to be "insane" even just a few days ago.

Tutition used to be free in the UK. Then they decided that those lazy students needed to have some skin in the game and suddenly tuition was 1000 pounds. Then a few years later it was 9000 pounds and all the college grads there now have US-level student debt.

A big reason Corbyn's a commie is because he wants to abolish tuition to bring the UK back to its communist past of 1997 and give young people the same deal all the people in charge had.

In 2015, Miliband said he'd cut them. To just SIX THOUSAND POUNDS. Maybe if he'd gone all the way...

by Atrios at 08:30

[Jun 09, 2017] Trump actions do not match his rhetoric: another bait and switch like in case of Obama ?

Notable quotes:
"... Trump actions do not match his rhetoric. His policies give large tax cuts to very wealthy people. He is not pursuing an agenda in favor of less inequality, faster growth or higher employment. Unfortunately, the pursuit of tax cuts for the wealthy will likely make the rest of us poorer. ..."
"... Yes Trump has proven to be much more stupid and ineffective I thought he would be. Maybe it was the way he vanquished his many competitors in the Republican primary and beat Hillary. ..."
"... He's been negligent and stupid except apparently with judges. He'd rather play golf and tweet. ..."
Jun 09, 2017 | economistsview.typepad.com

jonny bakho , June 09, 2017 at 09:37 AM

Trump actions do not match his rhetoric. His policies give large tax cuts to very wealthy people. He is not pursuing an agenda in favor of less inequality, faster growth or higher employment. Unfortunately, the pursuit of tax cuts for the wealthy will likely make the rest of us poorer.
RC AKA Darryl, Ron said in reply to jonny bakho... , June 09, 2017 at 09:45 AM
"Trump actions do not match his rhetoric..."

[From his accomplishments as POTUS so far one must wonder whether his socks would match were he left to dress himself.]

Christopher H. said in reply to RC AKA Darryl, Ron... , June 09, 2017 at 10:08 AM
Yes Trump has proven to be much more stupid and ineffective I thought he would be. Maybe it was the way he vanquished his many competitors in the Republican primary and beat Hillary.

He's been negligent and stupid except apparently with judges. He'd rather play golf and tweet.

RC AKA Darryl, Ron said in reply to Christopher H.... , June 09, 2017 at 10:34 AM
Agreed. But that still does not make all of his voters racist. Maybe some of them were misled, but the ones that I know were just plain desperate. They did not expect Trump to perform especially well as POTUS. It was enough for them that he was not Hillary.
Christopher H. said in reply to RC AKA Darryl, Ron... , June 09, 2017 at 10:44 AM
"But that still does not make all of his voters racist."

Never said it did. I agree that for many of them the vote was a middle finger at the establishment.

Corbyn has shown you can do well by running a good campaign which is anti-austerity and about delivering for the average voter.

[May 31, 2017] In a federal government run like a business ordinary american is a LOSER. They cut you off and leave you behind.

Notable quotes:
"... The biggest winner last year was Thomas M. Rutledge of Charter Communications, who pulled down a $98 million pay package, according to the Equilar 200 highest-paid chief executive rankings, conducted for The New York Times. ..."
"... Mr. Rutledge, 63, stormed to the front of the pack after closing his company's mega-merger, a $65 billion takeover of Time Warner and a smaller competitor. For that, he got a big bump in pay. The year before, his compensation totaled $16.4 million. ..."
May 31, 2017 | economistsview.typepad.com

Fred C. Dobbs , May 26, 2017 at 07:21 AM

As C.E.O. Pay Packages Grow, Top Executives
Have the President's Ear https://nyti.ms/2r4t6mY
NYT - MATTHEW GOLDSTEIN - MAY 26, 2017

Pay packages for America's top executives once again climbed in 2016 after slipping the year before.

Perhaps the pay surge reflects the times: Stocks are coming off a strong run. Unemployment is low. The economy is percolating.

And President Trump is not only promising to roll back what he calls excessive business regulations but also listening keenly to what corporate America has to say. Since taking office on Jan. 20, the businessman-turned-politician has met with hundreds of executives, including at least 41 of last year's 200 best-paid C.E.O.s, a New York Times analysis shows.

The biggest winner last year was Thomas M. Rutledge of Charter Communications, who pulled down a $98 million pay package, according to the Equilar 200 highest-paid chief executive rankings, conducted for The New York Times.

Mr. Rutledge, 63, stormed to the front of the pack after closing his company's mega-merger, a $65 billion takeover of Time Warner and a smaller competitor.

For that, he got a big bump in pay. The year before, his compensation totaled $16.4 million.

This past March, Mr. Rutledge met with Mr. Trump in the Oval Office. The president lavished him with praise for a plan to add 20,000 jobs, although the broad outlines of that initiative had been laid out nearly two years earlier, when the merger was first announced.

This combination - the gains in pay for chief executives, the president's pledge to deregulate and cut corporate tax rates - sets the stage for perhaps the most consequential moment for corporate governance since the financial crisis of 2008. Rising executive compensation only widens the gap between top executives and most American workers. Mr. Rutledge, for instance, made 2,617 times the average American worker's salary of $37,632, according to figures maintained by the A.F.L.-C.I.O. ...


(graphic, at the link))

President Trump Greets the C.E.O.s

Since Inauguration Day, President Donald J. Trump has met with at least 307 chief executives of American companies, 41 of whom were among the 200 highest-paid C.E.O.s in 2016, as calculated by Equilar, a compensation analysis company.

anne - , May 26, 2017 at 07:37 AM
http://cepr.net/blogs/beat-the-press/would-shareholders-in-charter-communications-have-less-money-if-they-paid-their-ceo-10-million-instead-of-98-million

May 26, 2017

Would Shareholders in Charter Communications Have Less Money If They Paid Their CEO $10 Million Instead of $98 Million?

That's the question the board of directors of Charter should be asking, but I suspect they never do. The company scored first in the New York Times's annual compilation * of CEO pay packages, coming in almost $30 million ahead of CBS, which is number 2. Of course if the CEOs earned less than the other top people in the corporate hierarchy would likely get smaller paychecks as well. And, it might be harder for the presidents of universities, foundations, and non-profits to explain the need for seven figure salaries for their work.

It seems unlikely that directors ever push in a big way for lower pay for CEOs because they have almost no incentive to do so. More than 99 percent of the directors put up for re-election are approved by shareholders. This is because it is very difficult to organize among shareholders to unseat a director. (Think of the difficulty of unseating an incumbent member of Congress and multiple by about 100.)

As a result, there is no reason to raise unpleasant questions at board meetings. Even though they are supposed to serve shareholders, which means not paying one penny more than necessary to CEOs and top management for their performance (just as CEOs try to pay workers as little as possible), their incentive is to get along with top management. The result is the upward spiral in CEO pay that we have seen in the last four decades.

A big part of the problem is that asset managers (think Vanguard and Blackrock) routinely support management slates as they vote trillions (literally) of dollars worth of stock held by people in their 401(k)s and IRAs. These asset managers care more about staying on good terms with top management than making sure they aren't overpaid. This creates a structure where ridiculously rich CEOs, who are usually big celebrants of the market, are effectively shielded themselves from market discipline. Isn't that the way markets are supposed to work?

* https://www.nytimes.com/interactive/2017/05/26/business/highest-paid-ceos.html

-- Dean Baker

Fred C. Dobbs - , May 26, 2017 at 07:49 AM
The Highest-Paid C.E.O.s in 2016

https://nyti.ms/2r4cpYS

NYT - JON HUANG and KARL RUSSELL - MAY 26

Here are 200 of the highest-paid chief executives in American business. The data comes from the Equilar 200 Highest-Paid CEO Rankings, which lists the compensation of the chief executives of 200 public companies with annual revenue of at least $1 billion, that filed proxies by May 1st.

(graphic at the link)

pgl - , May 26, 2017 at 08:52 AM
This list is often seen posted on the bedroom wall of certain young ladies living in Manhattan. And the poor young dudes at the gym cannot figure out why they can't get a date.
Fred C. Dobbs , May 26, 2017 at 11:20 AM
The Question Isn't Why Wage Growth Is So Low. It's Why
It's So High. https://nyti.ms/2r5tRMx via @UpshotNYT
NYT - NEIL IRWIN - MAY 26, 2017

One of the economy's biggest mysteries is this: The labor market is the strongest it has been in a decade, yet wages are rising barely faster than inflation.

For some reason, the booming job market and ultralow unemployment rate, which fell to 4.4 percent in April, haven't led employers to raise pay in a meaningful way. That flies in the face of a basic assumption of how the economy works: A tight labor market is expected to lead to pay increases that in turn fuel broader inflation.

But the mystery of the missing pay raises may have a surprisingly simple solution, and one that sheds light on the larger economic challenges of our age.

Consider a simple model for how much the average worker's pay ought to be rising: You could simply add together the productivity growth rate - how rapidly the output generated by each hour of labor is increasing - and the inflation rate, which tells us how quickly prices are rising.

Over the last 24 months through March, inflation has come in at 1.4 percent a year, and productivity growth at 0.6 percent. Those are very low numbers. And in our supersimple model, you may expect average worker wages to have risen only 2 percent.

In fact, the average hourly earnings for nonmanagerial private sector workers rose 2.4 percent a year in that period. You may not feel like cheering about that, but it's more than we might have expected, with inflation and productivity so weak. The real mystery, then, isn't why wages are rising so slowly, but why they're rising so fast.

If anything, the numbers show that workers are capturing more than their share of the spoils from a growing economy. And that, as it happens, is the reverse of a decades-long trend. For most of the last half-century - 84 percent of the time since 1966 - average wages have grown more slowly than would be predicted based on productivity and inflation growth. The rise in the share of employee compensation that takes the form of health benefits instead of wages is a factor, but doesn't explain the whole gap; for long stretches, that gap exceeded 2 percentage points a year.

That means the labor share of national income was shrinking, or, more plainly, that workers' slice of the economic pie got smaller while the part taken by shareholders and other owners of capital grew. ...

Paine - , May 26, 2017 at 02:08 PM
Shoddy
cm - , May 26, 2017 at 08:43 PM
If there is an argument being made, I'm not getting it. It's all just wall of text.
Christopher H. , May 26, 2017 at 01:00 PM
https://www.wsj.com/articles/rural-america-is-the-new-inner-city-1495817008

RURAL AMERICA IS THE NEW 'INNER CITY'

A Wall Street Journal analysis shows that since the 1990s, sparsely populated counties have replaced large cities as America's most troubled areas by key measures of socioeconomic well-being-a decline that's accelerating

By Janet Adamy and Paul Overberg

Atthe corner where East North Street meets North Cherry Street in the small Ohio town of Kenton, the Immaculate Conception Church keeps a handwritten record of major ceremonies. Over the last decade, according to these sacramental registries, the church has held twice as many funerals as baptisms.

In tiny communities like Kenton, an unprecedented shift is under way. Federal and other data show that in 2013, in the majority of sparsely populated U.S. counties, more people died than were born-the first time that's happened since the dawn of universal birth registration in the 1930s.

...

In many cities, falling crime has attracted more middle- and upper-class families while an influx of millennials delaying marriage has helped keep divorce rates low.

Maria Nelson, a 45-year-old media company manager who came to Washington, D.C., to work after college, had always assumed she would someday move to the suburbs, where she had grown up. A generation of heavy federal spending helped make the nation's capital one of the country's highest-earning urban centers. Its median household income rose to $71,000 a year in 2015, a 51% increase since 1980, adjusted for inflation.

While Ms. Nelson was able to buy a brick row house in 2002, she said she worries about younger colleagues-let alone anyone moving in from a small town-who face soaring real-estate prices. "The whole area just seems to be out of range for most people now," she said

In Kenton, Father Young said that despite their mounting troubles, he is optimistic about his parishioners. Some of them tell him they worry about what will happen when they die because they still provide for their adult children.

He likes to say there is always hope. "They can find a job," he said. "Columbus is close enough."

updated May 26, 2017

DeDude , May 26, 2017 at 01:36 PM
Sorry Kentucky; in a federal government run like a business - you are a LOSER. Time to cut you off and leave you behind. If we are going to WIN so much that we get tired of it, we just cannot carry to load of someone like you.

https://www.usatoday.com/story/opinion/2017/05/25/donald-trump-should-close-sell-states-like-kentucky-column/101989780/

[May 31, 2017] Neoliberal enerprices do not wnat to train workers, they expect to get workers that are 100 percent compatible with their requirement on the market or they hire no workers at all.

[Edited for clarity]
Training is offloaded to "human capital" to cut costs and became "workforce responsibility".
Notable quotes:
"... For example, the lack of desire to train is exactly neoliberal phenomenon as it increases costs. They want plug-in workers and that's why they destroyed the US university education to fit this paradigm. ..."
May 31, 2017 | economistsview.typepad.com

cm, May 26, 2017 at 09:12 AM

"Routine" jobs based on cognitive skill or motor skill *will* continue to be automated - it doesn't really depend much on the skill "level" but what complexity/variety of skill application the work requires. "Routine" means by definition identifiable patterns with low variation.

Work that can be performed over a communication line, or performed remotely and the work product transported in bulk (economy of scale), *will* continue to be moved to "low cost locations".

The retiring-boomer argument is not (entirely) about workforce size, but workforce training. When the boomers came of working age and the economy was growing, there was no prior workforce overhang on which business could ride - so the boomers had to be hired more or less on a "raw talent" basis and trained up. This also led to job multipliers - workers can train themselves only so much.

Then with automation "freeing up" a lot of workers, this created a pool of ready talent that has lasted until now, for most jobs. "New technology" always favors the younger generations which need (and get) different foundational skills, but most more general skill sets last for decades.

Most of the labor shortage rhetoric is not about inability to find suitable workers, but undesired necessity to train them (again) after having gotten used to not having to do that as much - because the boomers already had those special skills, or general skills that required only incremental upgrades over time.

libezkova, May 26, 2017 at 10:34 AM
cm,

Your argument is along the lines of neoliberal "human capital" concept and, as such, is false.

For example, the lack of desire to train is exactly neoliberal phenomenon as it increases costs. They want plug-in workers and that's why they destroyed the US university education to fit this paradigm.

It has nothing to do with baby-boomers phenomenon.

cm, May 27, 2017 at 01:35 PM
You can reject the (somewhat unfortunate - accidentally or deliberately) term "human capital" on whatever grounds you desire, but that doesn't invalidate the phenomenon it describes - that human work skill/experience and social relationships enabling labor-divided endeavors are a real thing, and have to be invested in, purposely built, and maintained like physical capital.

In "real existing socialism" it was not different -- investing in workforce skill from the cradle with a heavily built out and supported school/educational system was a top priority, and that it was about "human capital" (of course in the service of the bright future) was quite explicit.

[May 24, 2017] Universities serve as finishing schools for the ruling class by Rob Montz

May 23, 2017

Originally from: Why Colleges Fold to Students' Anti-Intellectual Hysterics The American Conservative

Middlebury College just completed its final round of disciplinary hearings for students involved in March's violent disruption of a lecture by Charles Murray, the influential but controversial social scientist.

The punishments to date have been laughably lax. Guilty students have been presented with non-official "probation" letters that'll vanish upon graduation .

This toothless response reflects a deeper rot. Middlebury, like many prestigious colleges, has steadily gravitated away from its core educational mission and now serves primarily as a sort of finishing school for the ruling class. Professors and administrators alike are simply expected to shower students with affirmation-and then hand over a degree securing smooth entry into America's elite. College has become four years of expensive fun. This is what parents and students now demand.

This change-from institutions of learning to institutions of affirming-threatens the nation's future as colleges foster a vicious strain of anti-intellectualism.

At over $60,000 a year, Middlebury's tuition buys much more than books, lodging, and classes. Students also get a campus-wide square dance , dining halls that host culinary " world tours ," lavish fitness facilities, and an annual winter carnival complete with fireworks, a hot chocolate bar, and snow sculptures.

The student body is ultra-affluent. Middlebury is among a small handful of schools with more students from the top one percent of the income distribution than those from the bottom 60 percent . And on graduation, newly christened alums are typically funneled right back into their elite enclaves, taking jobs at places like Goldman Sachs, McKinsey, and Amazon .

... ... ...

Rob Montz is a fellow at the Moving Picture Institute. Find his work at: RobMontz.com. Check out his interview with TAC executive editor Pratik Chougule at Fearless Parent Radio: http://fearlessparent.org/free-speech-controversy-us-elite-universities-episode-104/

[May 20, 2017] Outsourcing higher wage work is more profitable than outsourcing lower wage work

Notable quotes:
"... Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence. ..."
"... That's what happened with American IT. ..."
May 20, 2017 | economistsview.typepad.com
cm, May 20, 2017 at 04:51 PM
Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence.

Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work - with lower wages also labor cost as a proportion of total cost tends to be lower (not always).

And outsourcing and geographically relocating work creates other overhead costs that are not much related to the wages of the local work replaced - and those overheads are larger in relation to lower wages than in relation to higher wages.

libezkova -> cm... May 20, 2017 at 08:34 PM

"Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work"

That's what happened with American IT.

[May 19, 2017] What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; only at the beginning anything is possible

Notable quotes:
"... What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; It has a beginning when anything is possible. A middle when a broad spectrum of players prosper and there is extra money for infrastructure and public amenities. Then an end where wealth is increasingly concentrated in fewer and fewer hands and the waste stream has taken its toll. ..."
"... Tell me, when where these good old days, of "true" capitalism? Back when we were enslaving Africans? ..."
"... workers fail to ..."
"... Yeah, it's really a pity that author of such a well-written piece confuses GDP with living standards. If that was the case people wouldn't vote for nationalist and populists. ..."
"... serving their own interests; ..."
"... In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that. ..."
"... there are rumors that the Federal Liberal Party in Canada is exploring this. ..."
"... 8) Nothing in this section shall be construed to impose a duty upon: (a) A provider of an electronic store, gateway, marketplace or other means of purchasing or downloading software or applications to review or enforce compliance with this section by those applications or software; or (b) A provider of an interactive computer service to review or enforce compliance with this section by third-party content providers. As used in this paragraph, "interactive computer service" means any information service, system or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such services or systems operated or offered by libraries or educational institutions. (9) This section does not apply to general audience Internet websites, general audience online services, general audience online applications or general audience mobile applications, even if login credentials created for an operator's site, service or application may be used to access those general audience sites, services or applications. ..."
May 19, 2017 | www.nakedcapitalism.com
DJG , May 19, 2017 at 10:20 am

Definitely worth reading and reading again. What popped on first reading is the description of the rise of income in Poland and the stagnation of income in the U S of A. What pops for me on seccond reading is these paragraphs about tax evasion and income inequality: >>

One reason nothing happens is a culture of tax evasion. There's a folk belief in American business that if you pay full taxes, you're not doing your fiduciary duty, and your board will fire you.

Apple now has a quarter trillion dollars offshore that it refuses to put into direct productive use in the United States. Apple boasts that its products are designed in California-they will sell you a $300 book called Designed By Apple In California. But they do their damndest to make sure that California never sees a penny of their overseas profits.

You in the EU are all too familiar with this brand of tax evasion. Google, Amazon, Apple, Microsoft have all been under investigation or in court on charges of evading European taxes.

Another reason good intentions don't translate is that capitalism, especially venture capital, doesn't work very well when there is vast wealth inequality.

[Tax evasion isn't just a folk belief: It is taught in U.S. law schools and in business schools, along with union busting.]

Jef , May 19, 2017 at 10:52 am

What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; It has a beginning when anything is possible. A middle when a broad spectrum of players prosper and there is extra money for infrastructure and public amenities. Then an end where wealth is increasingly concentrated in fewer and fewer hands and the waste stream has taken its toll.

diptherio , May 19, 2017 at 11:49 am

Another reason good intentions don't translate is that capitalism, especially venture capital, doesn't work very well when there is vast wealth inequality.

The author does not understand that capitalism creates vast wealth inequality: that's the whole point. Inequality is a feature, not a bug, and so trying to save capitalism while eliminating vast wealth inequalities is working at cross-purposes, and only one of those aims can be successful and guess which one it always is?

justanotherprogressive , May 19, 2017 at 11:56 am

+100

Wisdom Seeker , May 19, 2017 at 12:39 pm

"capitalism creates vast wealth inequality: that's the whole point."

Not in Adam Smith's world, nor Henry Ford's. True capitalists prosper by creating wealth which improves the lives of everyone around them. Crony capitalists, the ones we have now, strip wealth from others. Witness today's bubble-and-bust cycles rather than the prior widespread economic growth.

The capitalism you see today is an abomination of the original concept, just as Mnuchin's claim to support "Glass Steagall" is an abomination. And don't get me started on the "Affordable" Care Act, or the "Patriot" act which gutted the Constitution

P.S. The original author's article is riddled with glaring factual errors, but he has the big picture right: it's time to restore Antitrust Law and apply it to the internet monopolists. And restore privacy rights and and it's a long list. Start fighting now, if you want anything to happen in your lifetime!

Carla , May 19, 2017 at 2:05 pm

The author's central thesis strikes me as correct: that Europe provides the only hope for applying any brakes whatsoever to the American tech sector. I hope someone over there is listening, as prospects here seem utterly hopeless.

MyLessThanPrimeBeef , May 19, 2017 at 2:21 pm

Freedom means people should have reasonable alternatives, choices on any product, service or ideology. Today's internet experience lacks that freedom aspect quite a bit.

diptherio , May 19, 2017 at 2:42 pm

Hokum. The "theory" is that it benefits everyone, but the reality is quite different. Tell me, when where these good old days, of "true" capitalism? Back when we were enslaving Africans? Back when we were hanging Wobblies? Back when we had to put nets around our factories to keep the workers from committing suicide? Please the dictatorship of the proletariat worked out just fine in Marx's theory, too.

clinical wasteman , May 19, 2017 at 3:00 pm

Another one for the gallery of glaring factual errors: "capitalists prosper by creating wealth". Unless that was an epic typo for something like: " workers fail to prosper while creating wealth".

As for "the original concept" of "capitalism", in which district of the astral plane did you find that? Apart from his anthropological sci-fi about the origins of money in "barter", Adam Smith generally tried to write about the real world. Just like Marx, except that Smith was speaking for a different class interest, whose "moral philosopher" imagined himself to be. For that reason, "capital" and "capitalist"(n.) were important concepts for Smith and Marx alike, but "capitalism" - a sort of hybrid implying the social reality and the ideology cheerleading for it at once without ever really distinguishing between the two - is an abstraction that neither had much time for, and one that only really caught on once both were dead.

Wisdom Seeker , May 19, 2017 at 4:01 pm

Wasteman – for a start, unlike todays Cronyists, Adam Smith understood that capitalism would not function for the benefit of all unless monopolies were restrained by government:

"The interest of the dealers [referring to stock owners, manufacturers, and merchants], however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, and absurd tax upon the rest of their fellow-citizens. (Adam Smith, Wealth of Nations (Amherst, New York: Prometheus Books, 1991), pages 219-220)"

See here for more details:
https://machineryofpolitics.wordpress.com/2012/01/04/adam-smith-on-the-crisis-of-capitalism-2/

Another interesting perspective is from J. K. Galbraith (sorry I lost the source) who pointed out that in an economy with healthy competition, profit margins are lower, but employment and wage income are necessarily higher.

diptherio , May 19, 2017 at 5:14 pm

And pray tell, who is it who will restrain the monopolists? Our elected officials, who just so happen to be under the control of those same capitalists? Which is possible due to the vast wealth inequalities that capitalism generates .

Capitalists, almost without exception, do everything in their power to avoid competition. The idea is to make a profit and competition is antithetical to that.

Lots of things are good in theory, like three-way relationships. Reality, on the other hand, feels no obligation to correspond with theory.

Vatch , May 19, 2017 at 3:27 pm

capitalism creates vast wealth inequality

Not exactly. Capitalism extends or expands existing inequality. It was the development of agriculture several thousand years ago that broke the approximate egalitarianism of the hunter gatherer lifestyle. Even that had some inequality, but not much. For more information, see the early chapters of The Great Leveler , by Walter Scheidel.

diptherio , May 19, 2017 at 5:23 pm

Hence the "vast" part. I'm not so silly as to think that before capitalism there was not wealth inequality. But not the type where a few hundred people control more wealth than a few billion. It would seem to me, on just a gut level based on a little reading, that whereas systems like feudalism were unequal but relatively stable*, i.e. the level of inequality stayed the same generation to generation, capitalism's dynamics have caused inequality to skyrocket, both nationally and globally.

*Or at least cyclically stable, as with regular debt jubilees in Sumer.

HBE , May 19, 2017 at 3:11 pm

"Living standards in Poland in 2010 had more than doubled from 1990." This sentence annoyed me to no end. Yes, the reason that is true is because every capitalist country in the world worked to smash and destroy communism without pause for its entire life and then internal and external oligarchs snatched up everything.

Living standards increased over that period in Poland but so did inequality and poverty. So the country got some shiny new consumer goods (which the author seems enamored by) while the populations poverty rate continues to climb. Thank god for privatization ("Suddenly people had cars, phones, appliances" and suddenly poverty surged as well), and the end of those no good dirty commies, right?

vlado , May 19, 2017 at 4:02 pm

Yeah, it's really a pity that author of such a well-written piece confuses GDP with living standards. If that was the case people wouldn't vote for nationalist and populists.

In any case, despite very good performance of Polish economy, its convergence to West Europe at least in terms of GDP (PPP) is questionable as the cases of Czech Republic and Slovenia show. See the article The convergence dream 25 years on in Bruegel

visitor , May 19, 2017 at 6:04 pm

There is a reason why people voted for the populist PiS and ousted the liberals who had made such a great job at bringing Poland into the EU and its "market society".

justanotherprogressive , May 19, 2017 at 10:23 am

A long but brilliant article that everyone should take the time to read! I want all the techies in my family to read it because it points out some of the uneasiness even techies feel about the their industry.

My favorite paragraph (although there were many close seconds):

"But real problems are messy. Tech culture prefers to solve harder, more abstract problems that haven't been sullied by contact with reality. So they worry about how to give Mars an earth-like climate, rather than how to give Earth an earth-like climate. They debate how to make a morally benevolent God-like AI, rather than figuring out how to put ethical guard rails around the more pedestrian AI they are introducing into every area of people's lives."
Yep .

MyLessThanPrimeBeef , May 19, 2017 at 2:28 pm

That popular vote comment is misleading as well.

A previous example was given about a hypothetical House vote, where, in yes-districts, voters are split 51-49 yes (assuming that is so lots of times, congress persons vote 'their conscience') and voters in no-districts are 90-10 for no. Yes votes win by one.

In that case, the popular vote actually is for No.

And that has nothing to do with slavery.

It's how the math works in a representative voting system.

PhilM , May 19, 2017 at 3:32 pm

Before responding to MLTPB, I'd like to voice my opinion that the OP article is thoughtful and reflects a decent level of awareness of the reality of the world, along with positive solutions that would be achievable in a polity that had the public good as its aim.

As for MLTPB's opinion on the vote, I beg to differ: it has everything to do with slavery. That's how the numbers work in our system, which is imperial, not representative. It's a bitch when instead of Augustus you get Caligula, but it doesn't change the basic reality of how the system works, and has worked since Ike. In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that.

Here is the reality: the people in any office in our federal government-basically everyone who lives in or around Washington DC-have the same relationship to American people as they have to Russian, Chinese, or Indian people: that of serving their own interests; predation, if you will; animal husbandry, if you prefer. They will act so as to extract the maximum value consistent with not-killing-the-goose-that-lays-the-golden-eggs from every person, wherever they are located, whatever their religion, whatever their nationality, as long as they are powerless, which means everyone who is a private citizen, however rich, or a small business; everyone who is not a Forbes 500 corporation.

The notion that the federal government is somehow tied to "Americans," or even to the geographical entity now known as the USA, much less to the values expressed in the so-called "founding documents," is a child's bedtime story.

It's amusing that it took the election of Trump to bring this realization about; but really, that is why some of us actually voted for Trump: to rub the idiots' noses in the reality of their political environment. (Not me, mind you; because I do not bother to vote: when I want something done, I write a check, like any experienced consumer of government services.)

There is a cure, but it is not changing the election mechanism so the choice of president results from the popular vote totals in a population of 300 million. No, it means changing it so there are 1000 presidents and 100,000 representatives and 1000 supreme courts, and 1000 republics. Those are the numbers that would achieve representative government the way it was designed to function by people who knew. Alternatively, you could reduce federal taxation to 1/10th of its current level, and assign all other taxation to the township, with a population limit of 20,000. Now you would have something that is no longer imperial.

But since most people since the dawn of history have lived under organizations that are imperial with perfect happiness, the appropriate course of action is not to struggle in futility for change, which would almost certainly do more harm than good, and result in an outcome that would just use up the world's resources more swiftly in the chaos of consumption and war. The optimum course is to watch reruns of amusing sitcoms and eat good food; to gratify the animal pleasures and such pleasures of the mind as remain to aging bodies mistreated by pharmaceuticals; and to die as quickly and painlessly as the authorities permit.

MyLessThanPrimeBeef , May 19, 2017 at 5:37 pm

In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that.

In that case, the popular vote question is not a question anymore (with the current 1 president, instead of 1,000 setup), as you point out here:

There is a cure, but it is not changing the election mechanism so the choice of president results from the popular vote totals in a population of 300 million.

I have mentioned before that Rome had, at one time, 2 or 4 co-emperors. You suggest 1,000 presidents, as a solution. That's nothing to do with slavery, except in the sense that we're all serfs or slaves. It about making one's voice heard within a smaller group, having someone representing you along with fewer constituents.

The inherent problem of having representatives vote, versus direct voting, is still here, as in the example given above. The math scales up and down.

Thomas Williams , May 19, 2017 at 11:04 am

Nice piece: Two things to note
– The Clintons, Bush & Obama presided over this mess and aided in it's creation but the albatross of abuse is being hung on Trump.
– He shares an enormous egotistical blind spot common to tech workers. He wants unionization and strength for tech workers but seems to advocate for a globalized work force. More than anything else, foreign workers are responsible for wage suppression in the US. Is he saying 'Tech workers are special and should be pampered but others should work for $1.85 per day"?
– The above points are not germaine to his central theme, which is important and well written. But it does raise questions about his values.

Knot Galt , May 19, 2017 at 2:13 pm

Agreed. Trump = Chucklehead and the shadow in T.S. Eliot's poem

Jacobite_In_Training , May 19, 2017 at 11:11 am

" Boycotts won't work, since opting out of a site like Google means opting out of much of modern life ."

Good .Opt out of modern life. Now. Get as far away from it as you possibly can. You'll be the better person for it. There was a time I felt 'modern life' was the place to be .Now the older me realizes 'modern life' is a sham, an illusion, and a trap.

A very cleverly designed trap, and one in which the cattle to be slaughtered all believe they are choosing their own destiny even as they are herded inexorably closer to the slaughterhouse.

Amusingly, although my younger naive and idealistic self had a significant part to play in the great tech revolutions and evolutions through the 90's and early 2000's (for which I will be eternally regretful and ashamed, given how the creations we labored on have been whored out by the pimps in the oligarchy and government) I was also incredibly lucky to have grown up on a farm and learned how to use a hoe, a hand powered washing machine, how to gather eggs and grow things.

Real things, things that can feed people. But more importantly .how to grow things like spirit and independence that do not rely on any flow of electrons to come to glorious fruition.

I also so much better understand what that prophet Edward Abbey was trying to warn us about all those decades ago .

" Growth for the sake of growth is the ideology of the cancer cell "

Tom , May 19, 2017 at 11:27 am

Indeed. The promise of technology has devolved into Clickbait Nation - where millions mindlessly click on endless deceptive headlines like rats pushing levers in a giant Skinner box.

justanotherprogressive , May 19, 2017 at 11:55 am

Is "opting out" really an option? Are we willing to opt out out of modern medicine too?
Whether we like it or not, we aren't opting out of using the internet, so we aren't opting out of anything this author talked about .

Sooooo ..wouldn't a better idea be to learn as much as we can about this technology and get involved in its decision making, so that we can control it and make it work for rather than against us?

Jacobite_In_Training , May 19, 2017 at 12:13 pm

I've had that debate before, people typically starting with the 'well, you are posting using the Internet so you aren't really opting out of anything', but thats a simplistic approach, and the process of opting out is a matter of degrees – it is never a binary on/off.

One can continue 'opting out' of aspects of society, and technology, to as extreme a position as you wish .even back to the stone age, should you choose. (sort of the ultimate boycott)

Tradeoffs are inherent to the process, no argument there .just be aware that the experience of opting out is itself liberating. You realize all these shiny objects, and expensive things, and
complicated processes that you have been raised to think of as critical necessities that cannot ever EVER be parted with .may not be so critical as you think.

Sometimes the tradeoffs will be negative, more often – in my experience – (once you have solved the problems presented by improvising/adapting/overcoming) you will find the 'tradeoffs' are a net positive.

You are, of course, a creature with free will and free to do what you choose . opt in, opt out .as you will. :)

Thuto , May 19, 2017 at 12:59 pm

Agreed, there are several gradations to this whole opting out thing. I for one am completely absent from any social media platform and feel no loss whatsoever because of this. It takes a committed group of independent thinkers to deconstruct and debunk this whole narrative that you're either "all-in" with these internet platforms or you opt out and life passes you by as you're consigned to an existence of irrelevance and ignorance about the world around you.

MoiAussie , May 19, 2017 at 1:05 pm

Perhaps it would be more accurate to say that you are very selective about the social media in which you participate.

Thuto , May 19, 2017 at 1:50 pm

If by social media we are talking facebook, instagram et al, then I have never participated in any of those. To be sure, this is not meant to sound like I take a dim view on those who do, the point is the narrative is typically framed, at least in my part of the world, as an all-in/opt-out binary in which participation in social media platforms is a prime determinant in who "remains relevant" and who doesn't

Vatch , May 19, 2017 at 3:29 pm

I don't have a MyFace account.

I love saying that!

justanotherprogressive , May 19, 2017 at 1:21 pm

I'm not sure what you think you are opting out of. If you are on the internet, then you have to have a carrier – Verizon, Comcast, etc. Do you think their data collection systems are different than what Google, Facebook, or any other social media does?

jrs , May 19, 2017 at 1:54 pm

and least they aren't funding trips to mars? :)

jrs , May 19, 2017 at 1:51 pm

Yea I think the truly open minded probably try many of the internet platforms just to see what they are like and then delete their accounts (this does not need to entail posting one's entire private life there needless to say). Not a lot of open mindedness out there really though, it's all extremes: rigid abstinence from it all, or hopeless addiction to it.

I mean I understand a priori rejection of the majority of what capitalism produces (except if it's necessary to life then well), but it is a pretty uninformed position from which to criticize (as is being addicted to it really).

PKMKII , May 19, 2017 at 2:46 pm

Even if you opt out personally, you're still going to be interacting with a lot of people, businesses, governments, etc., that are dependent on the Five Horsemen. Pay cash at the local business, but travel down the supply chain that brought the goods there and you'll run into someone using cloud storage, social media, consumer surveillance data, etc.

Wisdom Seeker , May 19, 2017 at 1:01 pm

Regarding "get involved in its decision making" –

Ordinary folks have really only two ways to do this. One is in their consumer choices. Avoid or boycott companies that abuse their customers – hit them in their wallets. The other is in their voting and political participation push privacy rights, antitrust enforcement, etc. higher on the political agenda.

It's entirely possible to be comfortably social without "social media". Personally, I boycott Facebook, Twitter, and (as much as possible) Google and Ebay. Google is tough because they have infiltrated the schools with Google Classroom (which has value, but do we really want an internet advertising company to be gathering data on our children?). Microsoft is tough because of the Office monopoly, but just because I have to use it at work doesn't mean I need to pay them any money anywhere else in my life There are also ways to buy online without using Amazon.

lyman alpha blob , May 19, 2017 at 1:58 pm

There are other search engines, browsers, email services, etc. besides those operated by the giants. DuckDuckGo, protonmail, and the Opera browser (with free built-in VPN!) work well for me.

The problem is, if these other services ever do get popular enough, the tech giants will either block them by getting their stooges appointed to Federal agencies and regulating them out of existence, or buy them.

I've been running from ISP acquisitions for years, as the little guys get bought out I have to find an even littler one. Luckily I've found a local ISP, GWI, that I've used for years now. They actually came out against the new regulations that would allow them to gather and sell their customers' data. Such anathema will probably wind up with their CEO publicly flayed for going against all that is good and holy according to the Five Horsemen.

Mel , May 19, 2017 at 1:26 pm

There are two sides to opting out.
When net neutrality is gone, then capital and market concentration will transform the internet into what cable TV is now, and nobody will need it much.
Contrariwise the big tech companies are taking over the implementation of major social functions:
– if you can't vote without the internet
– if you can't spend your money without the internet
– if you can't contact your friends without the internet
– if you can't get news without the internet - this has already happened - just look at us all here.
– if you can't join a political party without liking it on your Facebook page and following it on Twitter - there are rumors that the Federal Liberal Party in Canada is exploring this.
As I said somewhere else, all this would amount to an uncontracted and unspecified public/private partnership (various ones, actually) and all entered into unexamined. Time to examine them while they're still easy to change.

HotFlash , May 19, 2017 at 5:58 pm

there are rumors that the Federal Liberal Party in Canada is exploring this.

Interesting. Are they going to get us all free internet? If not, I think they will find a big surprise.

jrs , May 19, 2017 at 1:45 pm

To assume that workers in ANY Industry (including tech where we know the big players have rigged the labor market against tech workers) have more power than consumers seems pretty unrealistic to me. Of course consumer power is one dollar one vote and hardly democratic but at least consumers do have options and some power. The employee role is a powerless one in the U.S..

Kris Alman , May 19, 2017 at 11:40 am

We can either continue on the knowledge economy road, where our personal data is commodified. Or we could fight for a knowledge society, where we collectively access knowledge while protecting our identity and privacy. I vote for the latter.

Google would plant a chip in every child if they could. Short of that, they have insinuated themselves in public schools, hoping that every kid in America will consummate their relationship with this giant after they graduate from k-12. See this NY Times article from last weekend: How Google Took Over the Classroom

It's hard to mitigate their reach. In a landmark student privacy law passed in California (with an even weaker version passed in my state of Oregon), they built in what I call a Google exemption clause.

( 8) Nothing in this section shall be construed to impose a duty upon:
(a) A provider of an electronic store, gateway, marketplace or other means of purchasing or downloading software or applications to review or enforce compliance with this section by those applications or software; or
(b) A provider of an interactive computer service to review or enforce compliance with this section by third-party content providers. As used in this paragraph, "interactive computer service" means any information service, system or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such services or systems operated or offered by libraries or educational institutions.
(9) This section does not apply to general audience Internet websites, general audience online services, general audience online applications or general audience mobile applications, even if login credentials created for an operator's site, service or application may be used to access those general audience sites, services or applications.

The Campaign for a Commercial-Free Child and the Parent Coalition for Student Privacy (a group with which I have worked) just put out a Parent Toolkit for Student Privacy .

Patient Privacy Rights has an upcoming international summit that is free. Stream it! See: https://patientprivacyrights.org/health-privacy-summit/

MyLessThanPrimeBeef , May 19, 2017 at 2:07 pm

We can either continue on the knowledge economy road, where our personal data is commodified. Or we could fight for a knowledge society, where we collectively access knowledge while protecting our identity and privacy. I vote for the latter.

When I am not accessing knowledge, I would still prefer to remain private.

For example, what videos I access for entertainment should private. It's not knowledge I access, just something to pass time.

That those activities should b protected as well.

Privacy-protected-society is probably a broader term than knowledge society.

MyLessThanPrimeBeef , May 19, 2017 at 2:09 pm

And the Google exemption clause reads like a Facebook exemption clause as well (or Amazon or Warner Cable exemption clause).

[May 18, 2017] Toward a Jobs Guarantee at the Center for American Progress by Lambert Strether

Notable quotes:
"... By Lambert Strether of Corrente ..."
"... The Financial Times ..."
"... customer ..."
May 17, 2017 | www.nakedcapitalism.com
Posted on May 17, 2017 By Lambert Strether of Corrente

I had another topic lined up today, but this ( hat tip alert reader ChrisAtRU ) is so remarkable - and so necessary to frame contextualize immediately - I thought I should bring it your attention, dear readers. The headline is "Toward a Marshall Plan for America ," the authors are a gaggle of CAP luminaries with Neera Tanden leading and Rey Teixeira trailing, and the "Marshall Plan" indeed includes something called a "Jobs Guarantee." Of course, I trust Clinton operatives like Tanden, and Third Way types like Teixeira, about as far as I can throw a concert grand piano. Nevertheless, one sign of an idea whose time has come is that sleazy opportunists and has-beens try to get out in front of it to seize credit[1] and stay relevant. So, modified rapture.

In this brief post, I'm going to look at the political context that drove CAP - taking Tanden, Teixeira, and the gaggle as a proxy for CAP - to consider a Jobs Guarantee (JG), briefly describe the nature and purpose of a JG, and conclude with some thoughts on how Tanden, Teixeira would screw the JG up, like the good liberals they are.

Political Context for CAP's JG

Let's begin with the photo of Prairie du Chien, WI at the top of CAP's JG article. Here it is:

I went to Google Maps Street View, found Stark's Sports Shop (and Liquor Store), and took a quick look round town. Things don't look too bad, which is to say things look pretty much like they do in my own home town, in the fly-over state of Maine; many local businesses. The street lamps make my back teeth itch a little, because along with bike paths to attract professionals, they're one of those panaceas to "bring back downtown," but as it turns out Prairie du Chien has marketed itself to summer tourists quite successfully as " the oldest Euro-American settlement established on the Upper Mississippi River," so those lamps are legit! (Of course, Prairie du Chien, like so much of flyover country, is fighting an opioid problem , but that doesn't show up in Street View, or affect the tourists in any way.)

More to the point, Crawford County WI, in which Prairie du Chien is located, was one of the counties that went for Obama, twice, and then flipped to Trump ( 50.1% Trump, 44.6% Clinton ), handing Trump the election, although the CAP authors don't mention this. AP has a good round-up of interviews with Prairie du Chien residents , from which I'll extract the salient points. On "flipping," both from Obama (since he didn't deliver) and away from Trump (if he doesn't deliver):

In 2012, [Lydia Holt] voted for Barack Obama because he promised her change, but she feels that change hasn't reached her here. So last year she chose a presidential candidate unlike any she'd ever seen, the billionaire businessman who promised to help America, and people like her, win again. Many of her neighbors did, too .

In this corner of middle America, in this one, small slice of the nation that sent Trump to Washington, they are watching and they are waiting, their hopes pinned on his promised economic renaissance. And if four years from now the change he pledged hasn't found them here, the people of Crawford County said they might change again to someone else.

"[T]hings aren't going the way we want them here," she said, "so we needed to go in another direction."

And the issues:

[Holt] tugged 13 envelopes from a cabinet above the stove, each one labeled with a different debt: the house payment, the student loans, the vacuum cleaner she bought on credit.

Lydia Holt and her husband tuck money into these envelopes with each paycheck to whittle away at what they owe. They both earn about $10 an hour and, with two kids, there are usually some they can't fill. She did the math; at this rate, they'll be paying these same bills for 87 years.

Kramer said she's glad the Affordable Care Act has helped millions get insurance, but it hasn't helped her he and her husband were stunned to find premiums over $1,000 a month. Her daughter recently moved into their house with her five children, so there's no money to spare. They opted to pay the penalty of $2,000, and pray they don't get sick until Trump, she hopes, keeps his promise to replace the law with something better.

Among them is a woman who works for $10.50 an hour in a sewing factory, who still admires Obama, bristles at Trump's bluster, but can't afford health insurance. And the dairy farmer who thinks Trump is a jerk - "somebody needs to get some Gorilla Glue and glue his lips shut" - but has watched his profits plummet and was willing to take the risk.

And of course jobs (as seen in this video, "Inside the Minds and Homes of Voters in Prairie du Chien, WI," made by students at the University of Wisconsin-Milwaukee).

So that's Prairie du Chien, Wisconsin. CAP frames the electoral context this way:

While the election was decided by a small number of votes overall, there was a significant shift of votes in counties in critical Electoral College states, including Iowa, Michigan, Ohio, Pennsylvania, and Wisconsin.

(I could have told them that. In fact, I did! ) And the reasons for the shift:

What was going on in these heavily white working-class counties that might explain support for Trump? Without diminishing the importance of cultural and racial influences, it is clear to us that lingering [sic] economic pressures among important voting blocs helped to create a larger opening for Trump's victory.

We do not yet know the exact reasons for the drop in turnout among young people and black voters. But with President Obama not on the ticket to drive voter enthusiasm, it is quite possible that lingering job and wage pressures in more urban areas with lots of young people, and in areas with large populations of African-Americans, yielded similar, if distinct, economic anxiety in ways that may have depressed voter turnout among base progressives. The combined effect of economic anxiety may have been to drive white noncollege voters toward Trump and to drive down voter engagement and participation among base progressives.

Either way, issues related to lost jobs, low wages, high costs, and diminished mobility played a critical role in setting the stage for a narrow populist victory for Trump.

(I could have told them that, too. In fact, I did! ) Note the lingering "Obama Coalition" / identity politics brain damage that casually assumes "base progressives" equate to African-Americans and youth. Nevertheless, mild kudos to CAP for fighting through to the concept that "economic pressures among important voting blocs helped to create a larger opening for Trump's victory." The CAP paper then goes on to recommend a JG as an answer to such "economic pressures."[2]

Nature and Purpose of a JG

Here's the how and why of a JG (though I wrote it up, I had the help of practioners):

How would the JG work from the perspective of a working person (not an owner?) Or from the perspective of the millions of permanently disemployed? The MMT Primer :

If you are involuntarily unemployed today (or are stuck with a part-time job when you really want to work full time) you only have three choices:

Employ yourself (create your own business-something that usually goes up in recessions although most of these businesses fail) Convince an employer to hire you, adding to the firm's workforce Convince an employer to replace an existing worker, hiring you

The second option requires that the firm's employment is below optimum-it must not currently have the number of workers desired to produce the amount of output the firm thinks it can sell. …

If the firm is in equilibrium, then, producing what it believes it can sell, it will hire you only on the conditions stated in the third case-to replace an existing worker. Perhaps you promise to work harder, or better, or at a lower wage. But, obviously, that just shifts the unemployment to someone else.

It is the "dogs and bones" problem: if you bury 9 bones and send 10 dogs out to go bone-hunting you know at least one dog will come back "empty mouthed". You can take that dog and teach her lots of new tricks in bone-finding, but if you bury only 9 bones, again, some unlucky dog comes back without a bone.

The only solution is to provide a 10 th bone. That is what the JG does: it ensures a bone for every dog that wants to hunt.

It expands the options to include:

    There is a "residual" employer who will always provide a job to anyone who shows up ready and willing to work.

It expands choice. If you want to work and exhaust the first 3 alternatives listed above, there is a 4 th : the JG.

It expands choice without reducing other choices. You can still try the first 3 alternatives. You can take advantage of all the safety net alternatives provided. Or you can choose to do nothing. It is up to you.

If I were one of the millions of people permanently disemployed, I would welcome that additional choice. It's certainly far more humane than any policy on offer by either party. And the JG is in the great tradition of programs the New Deal sponsored, like the CCC, the WPA, Federal Writers' Project , and the Federal Art Project . So what's not to like? ( Here's a list of other JGs). Like the New Deal, but not temporary!

Intuitively: What the JG does is set a baseline[3] for the entire package offered to workers, and employers have to offer a better package, or not get the workers they need. When I came up here to Maine I'd quit my job voluntarily and so wasn't eligible for unemployment. Then the economy crashed, and I had no work (except for blogging) for two years. There were no jobs to be had. I would have screamed with joy for a program even remotely like this, and I don't even have dependents to take care of. It may be objected that the political process won't deliver an offer as good as the Primer suggests. Well, don't mourn. Organize. It may be objected that a reform like the JG merely reinforces the power of the 0.01%. If so, I'm not sure I'm willing to throw the currently disemployed under the bus because "worse is better," regardless. Anyhow, does "democratic control over the living wage" really sound all that squillionaire-friendly to you? Aren't they doing everything in their power to fight anything that sounds like that? The JG sounds like the slogan Lincoln ran on, to me: "Vote yourself a farm!" [3]

So, what does the JG for the economy? MMT was put together by economists; from an economists perspective, what is it good for? Why did they do that? The Primer once more:

some supporters emphasize that a program with a uniform basic wage[4] also helps to promote economic and price stability.

The JG/ELR program will act as an automatic stabilizer as employment in the program grows in recession and shrinks in economic expansion, counteracting private sector employment fluctuations. The federal government budget will become more counter-cyclical because its spending on the ELR program will likewise grow in recession and fall in expansion.

Furthermore, the uniform basic wage will reduce both inflationary pressure in a boom and deflationary pressure in a bust. In a boom, private employers can recruit from the program's pool of workers, paying a mark-up over the program wage. The pool acts like a "reserve army" of the employed, dampening wage pressures as private employment grows. In recession, workers down-sized by private employers can work at the JG/ELR wage, which puts a floor to how low wages and income can fall.

Finally, research indicates that those without work would prefer to have it :

Research by Pavlina Tcherneva and Rania Antonopoulos indicates that when asked, most people want to work. Studying how job guarantees affect women in poor countries, they find the programs are popular largely because they recognize-and more fairly distribute and ­compensate-all the child- and elder care that is now often performed by women for free (out of love or duty), off the books, or not at all.

Enough of this crap jobs at crap wages malarky!

And here's the how and why of a JG, as described by CAP :

We propose today a new jobs guarantee, and we further expect a robust[3] agenda to be developed by the commission.

The low wages and low employment rates for those without college degrees only exist because of a failure of imagination. There is no shortage of important work that needs to be done in our country. There are not nearly enough home care workers to aid the aged and disabled. Many working families with children under the age of 5 need access to affordable child care. Schools need teachers' aides, and cities need EMTs. And there is no shortage of people who could do this work. What has been missing is policy that can mobilize people.

To solve this problem, we propose a large-scale, permanent program of public employment and infrastructure investment-similar to the Works Progress Administration (WPA) during the Great Depression but modernized for the 21st century. It will increase employment and wages for those without a college degree while providing needed services that are currently out of reach for lower-income households and cash-strapped state and local governments. Furthermore, some individuals may be hired into paying public jobs in which their primary duty will be to complete intensive, full-time training for high-growth, in-demand occupations. These "public apprenticeships" could include rotations with public and private entities to gain on-the-ground experience and lead to guaranteed private-sector employment upon successful completion of training.

Such an expanded public employment program could, for example, have a target of maintaining the employment rate for prime-age workers without a bachelor's degree at the 2000 level of 79 percent. Currently, this would require the creation of 4.4 million jobs. At a living wage-which we can approximate as $15 per hour plus the cost of contributions to Social Security and Medicare via payroll taxes-the direct cost of each job would be approximately $36,000 annually. Thus, a rough estimate of the costs of this employment program would be about $158 billion in the current year. This is approximately one-quarter of Trump's proposed tax cut for the wealthy on an annual basis.

With tis background, let's look at how liberals would screw the JG up.

How a CAP JG Would Go Wrong

Before getting into a little policy detail, I'll examine a few cultural/framing issues. After all, CAP does want the program's intended recipients to accept it with good grace, no? Let me introduce the over-riding concern, from Joan C. Williams in The Financial Times : "They don't want compassion. They want respect" :

Williams warns that Republican errors alone won't give Democrats back the WWC.

Or any part of the WC; as even CAP recognizes, although WWC disproportionately voted Trump, and non-WWC disproportionately stayed home.

While [Williams] agrees that the Democrats have mobilised their base since Trump's election, she has "one simple message" for the party: it needs to show the WWC respect, "in a tone suitable for grown-ups". Democrats must say: "We regret that we have disrespected you, we now hear you." She asks: "Is this so hard? Although the risk is that the response will be, 'Oh, those poor little white people with their opioid epidemics, let's open our hearts in compassion to them.' That's going to infuriate them. They don't want compassion, they want respect."

To show respect, it would really behoove liberals to deep-six the phrase "economic anxiety," along with "economic frustrations," "economic concerns," "economic grievances," and "lingering economic pressures."[4] All these phrases make successful class warfare a psychological condition, no doubt to be treated by a professional (who by definition is not anxious, not frustrated, has no grievances, and certainly no economic pressures, because of their hourly rate (or possibly their government contract).

To show respect, it would also behoove liberals to deep-six the concept that markets come first; people who sell their labor power by the hour tend to be sensitive about such things. Take, for a tiny example, the caption beneath the image of Prairie du Chein. Let me quote it:

A customer crosses the street while leaving a shop along the main business district in Prairie du Chien, Wisconsin, January 2017.

Really? A customer ? Does the human figure have to be a customer ? Why?

Along the same lines, drop the "affordable" crap; ObamaCare should have ruined that branding already; what seems like it's affordable to CAP writers in the Beltway probably isn't affordable at all to somebody making $10 an hour. Anyhow, if something like childcare or for that matter #MedicareForAll ought to be a universal direct material benefit, then deliver it!

To show respect, abandon the "Marshall Plan" framing immediately. Because it means the "winners" are going to graciously help the "losers," right? And prudentially, liberals don't really want to get the working class asking themselves who conducted a war against them, and why, right?

To show respect, make the JG a truly universal benefit, a real guarantee, and don't turn it into an ObamaCare-like Rube Goldberg device of means-testing, worthiness detection, gatekeeping, and various complex forms of insult and degradation, like narrow networks. This passage from CAP has me concerned:

Such an expanded public employment program could, for example, have a target of maintaining the employment rate for prime-age workers without a bachelor's degree at the 2000 level of 79 percent.

That 'target" language sounds to me very much like the "dogs and bones" problem. Suppose currently we have 6 bones and 10 dogs. The "target" is 7 bones. Suppose we meet it? There are still 3 dogs without bones! Some guarantee! The JG should be simple: A job for everyone who wants one. None of this targeting or slicing and dicing demographics. The JG isn't supposed to be an employment guarantee for macro-economists (who basically have one anyone).

To show respect, make the JG set the baseline for wages (and working conditions). This passage from CAP has me concerned:

Second, because it would employ people to provide services that are currently needed but unaffordable, it would not compete with existing private-sector employment.

This language seems a bit slippery to me. If Walmart is paying $10.00 an hour, is the JG really going to pay $9.50?

Finally, you will notice that the CAP JG is shorn of any macro-economic implications. Note, for example, that replacing our current cruel system of regulating the economy by throwing people out of work isn't mentioned. Note also that CAP also accepts the false notion that Federal taxes pay for Federal spending. That puts CAP in the austerity box, meaning that the JG might be cut back just when it is most needed, not least by working people.

Conclusion

I do want to congratulate CAP, and without irony, for this passage:

[The JG] would provide the dignity of work, the value of which is significant. When useful work is not available, there are large negative consequences, ranging from depression, to a decline in family stability, to "deaths of [sic] despair."

It's good to see the Case-Deaton study penetrating the liberal hive mind. Took long enough. Oh, and this makes the JG a moral issue, too. The pallid language of "economic anxiety" should be reformulated to reflect this, as should the program itself.

NOTES

[1] The JG originally comes from the MMT community; here is a high-level summary . Oddly, or not, there's no footnote crediting MMTers. Interestingly, Stephanie Kelton, who hails from the University of Missouri at Kansas City's MMT-friendly economics department, before Sanders brought her onto the staff at the Senate Budget committee, was not able to persuade Sanders of the correctness and/or political utility of MMT generally or the JG in particular.

[2] I guess those famous Democrat 2016 post mortems will never be published, eh? This will have to do for a poor substitute. Or maybe the Democrats just want us to read Shattered .

[3] In my view, "robust" is a bullshit tell. Back when I was a hotshot consultant, the operational definition of "robust" was "contained in a very large three-ring binder."

[4] Dear God. Are these people demented? Nobody who is actually under "economic pressure" would use these words. And so far as I can tell, "lingering" means permanent.

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism ("Because markets"). I don't much care about the "ism" that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don't much care, as long as the benefits are delivered. To me, the key issue - and this is why Medicare for All is always first with me - is the tens of thousands of excess "deaths from despair," as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics - even the worthy fight to help the refugees Bush, Obama, and Clinton's wars created - bright shiny objects by comparison. Hence my frustration with the news flow - currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press - a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let's call such voices "the left." Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn't allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I've been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

ChrisAtRU , May 17, 2017 at 1:38 pm

Thank you! Thank you! Thank you!

Clive , May 17, 2017 at 2:37 pm

No, thank you!

Dead Dog , May 17, 2017 at 4:40 pm

Yes, a great essay. And thank you commentariat.
Of course, there is a potential conflict from those who want a basic income, but don't want to work. Such a position frames such people badly, but a basic income remains an essential part of a JG world IMO.
The JG would provide incentive if you didn't lose the safety net and could add to it by working in a JG program.
Most here in this place accept that a sovereign government can pay for programs which are not funded by taxes (or debt) and the JG and basic income concepts could be a way to test this in a controlled way.
The main reason I think that politicians continue to have blinkers (LA LA, CAN'T HEAR YOU) with respect to MMT is that they are scared witless of a government with unlimited spending powers. That's why we can't have nice things.

jrs , May 17, 2017 at 5:26 pm

don't want to work, hmm I don't even know if I could work in a job without a decent amount of slack (A.D.D. mind may not be capable of it or something and often not for lack of trying, though I do a decent amount of unpaid work in my precious leisure time). Or at least not the full 40 hours, so if the job guarantee bosses are slave drivers, I don't know, I'd probably be fired from my job guaranteed job period.

But what if a job was aligned with one's interest? Don't know, never experienced that.

But all that aside and never even mind unemployment, given how horrible the job circumstances are that I see many people caught in (and I definitely don't mean having slack – that's a good thing, I mean verbal ABUSE, I mean working endless hours of unpaid overtime etc.), any alternative would seem good.

nycTerrierist , May 17, 2017 at 6:19 pm

+1!

PKMKII , May 17, 2017 at 1:55 pm

The "target" language also makes me worry that they're defining optimal employment by the inflation-obsessed standards of Chicago-school economists, thus coming up short in the name of protecting the investor class.

Minor quibble: Does Maine constitute flyover country? Usually that term means the parts of the country that the well-to-do "fly over" from east coast cities to west coast ones, with perhaps an exception for Chicago. You wouldn't fly over Maine for any of those routes. Not to mention, Maine is a popular vacationing/summer home state for rich New Englanders, so it doesn't exactly have an "other" status for them the way rural Wisconsin would.

Huey Long , May 17, 2017 at 4:22 pm

I think Maine is legit flyover country as flying over Maine was once mandatory on the transatlantic route in order to Gander Airport in Newfoundland. I know, I know, it's a bit of a stretch but I'm trying here!

As for Maine's other status, you're spot on about "down east" (coastal) Maine and some of the lakes being popular with the landed gentry, but the interior of the state is sparsely populated, poor, white, and marginalized. Many of the paper mills have gone belly-up and the economy in many places consists of picking potatoes or cutting down trees.

Knifecatcher , May 17, 2017 at 5:06 pm

I used to do a lot of business travel to Nova Scotia. Hard to get there from the US without flying over Maine. But I think Lambert meant flyover in the pejorative "why would you live here when you could be an artisanal pickle maker in Brooklyn" sense.

Peham , May 17, 2017 at 2:17 pm

Thanks much! A JG as you describe plus nationalizing all our current rentier industries ought to just about do the trick.

Sutter Cane , May 17, 2017 at 2:24 pm

Are you still guaranteed a job if you happen to make any negative comments about Neera Tanden? (Asking for Matt Bruenig)

nihil obstet , May 17, 2017 at 6:50 pm

Matt Bruenig had other issues with the article: More Job Guarantee Muddle . While he points out that the jobs suggested in the article should be permanent rather than temporary jobs, I go on with my own little sense of discomfort that they all involve putting the otherwise jobless in charge of caring for the helpless. I don't find that a good idea. I've spent enough time both working with and volunteering in human service organizations to have observed that it's not really appropriate work for a lot of people, even for many good-hearted volunteers. It really dampens my enthusiasm for a JG that I have yet to see an argument for it that doesn't invoke child and elderly care as just great jobs that the jobless can be put to doing.

Just another quibble with this post. I first heard of a job guarantee and heard arguments for it in the U.S. civilian society from Michael Harrington in the early 1980s (guaranteed jobs have been a feature of the state capitalist societies that call themselves socialist throughout the 20th c.), so I don't find it particularly odd when the MMT community isn't mentioned as originating the idea. In fact, I tend to respond with "Hey, MMTers, learn some history."

jrs , May 17, 2017 at 7:06 pm

good points.

Susan the other , May 17, 2017 at 2:47 pm

Thanks for this article Lambert. Why should we trust CAP to handle this when they have done nothing toward this end in their entire history. In fact, in undeniable fact, if we don't do something about demand in this country we will have no economy left at all. For these guys to even approach a JG you know they are panicked. Nobody goes over this fact because it turns them all into instant hypocrites. I spent yesterday listening to some MMTers on U-Tube, Wray and some others. They all clearly and succinctly explain the systemic reasons for JG. Not nonsense. In fact, MMT approaches a JG as the opposite of nonsense on so many levels. As you have pointed out – these CAP people are a little late to reality. And their dear leader Obama is first in line for the blame, followed closely by Bill Clinton and his balance-the-budget cabal of bankster idiots. And etc. And these JG jobs could be just the jobs we need to turn global warming around. It could be the best spent money ever. It is a very straight-forward calculation.

Sue , May 17, 2017 at 2:57 pm

Dispel ambiguity. Call it LWUJG, Living Wage Universal Job Guarantee

Sandler , May 17, 2017 at 3:20 pm

I don't know how you even bother. America is so far away from this intellectually and culturally, there is no chance. Right now the "jobs guarantee" is get arrested for something bogus and be sentenced to prison to do forced labor for outsourcing corporations (yes this is real). Look where the GOP stands on basic issues which were settled long ago in Europe, they are in the Stone age. The Dems are right wing everywhere else.

With US institutions usually run horribly how do you expect this to be well run? Is the VA a shining example? I certainly would not have hope for this at the federal level.

Murph , May 17, 2017 at 3:43 pm

I feel the same way often but I've got to allow myself some hope once in a while. This development is at least turn in the right direction for the moment, nothing else. There's nothing wrong with being (aprehensively) pleased about that.

Sandler , May 17, 2017 at 5:29 pm

I'd like to get a basic unemployment welfare scheme going first. We don't even have that! We have an "insurance" program which requires you to first have held a job which paid enough for long enough, and then get fired, not quit. And it only pays for six months. Again, this was settled in other rich countries a long time ago.

Darius , May 17, 2017 at 6:38 pm

Swing for the fences, ladies or gentlemen. Throw incremental change overboard, along with Hillary, Tim Kaine and Neera.

Disturbed Voter , May 17, 2017 at 6:03 pm

There is a job guarantee in Castro's Cuba. So wonderful, people are swimming from Miami to Havana ever day.

Though you have it exactly right in the US the job guarantee is to be a felon on a privatized prison farm usually called a "plantation". I am looking forward to my neighbors finally being put to work. At least it is only building a Presidential Library for Obama, not a pyramid for Pharaoh.

witters , May 17, 2017 at 6:40 pm

"There is a job guarantee in Castro's Cuba. So wonderful, people are swimming from Miami to Havana ever day."

That is why Cuba will never last! It will die in minutes, without any outside help!

Mind you, here's a thought. Maybe the one's who didn't want to work, left for Florida!

diptherio , May 17, 2017 at 3:49 pm

My prediction: by the time this makes it through Congress, it will be a guarantee for no more than 15 hours per week at slightly below the minimum wage and you'll only be able to be in the program for nine months, total during your lifetime. Or am I being overly cynical?

Maybe we need to update that old saw: "First they ignore you, then they laugh at you, then they co-opt your idea and strip the soul out of it, then you kinda win but not really, but hey that's progress, right?"

Even though I'm cynical, I'm with Lambert in being for just about anything that makes us bottom-20%ers lives better, even if it is highly flawed. Heck, I'd even be for a BIG on that basis, even if Yves is right about the negative side-effects of that policy.

Huey Long , May 17, 2017 at 4:29 pm

they co-opt your idea and strip the soul out of it, then you kinda win but not really, but hey that's progress, right?"

SPOT ON!!!

This is EXACTLY what Bismark did in 1883 with his Staatssozialismus (state socialism) reforms.

Disturbed Voter , May 17, 2017 at 6:03 pm

In 1883, Germany still had hope it was only 12 years old!

Jeff , May 17, 2017 at 3:50 pm

If I understood correctly, Norway is running such a program since many years.
Basically, when you are out of a job, you get unemployment benefits (a low but decent salary, health care and other modern facilities unheard of is the US) – which last forever .
On the other hand, any public institution can call you in to help a hand: washing dishes at the school kitchen one day, waiting on the elderly the other day, helping out in the local library wherever hands are needed but not available.
So it is not really a JG, but you are guaranteed to help out your local community, and you are guaranteed a minimal income. That seems close enough to me.

Fred1 , May 17, 2017 at 4:27 pm

This is just positioning to defend against a challenger from the left who is promoting a genuine JG.

See we agree about a JG, I'm for it too and here is my 9 point proposal on my website.

robnume , May 17, 2017 at 5:56 pm

Thanks, Lambert, for a very interesting post. I combed through CAP's panel of "experts." I was not impressed.
I'm going to start my own think tank. Gonna call it CRAP: Center for Real American Progress.

lyle , May 17, 2017 at 7:18 pm

Of course in the north in the winter you could go back to shoveling snow with snow shovels (no machines allowed) and ban use by public employees of riding lawnmowers in the summer in favor of powered walk behind mowers. From what I have read this is what china did on the 3 gorges dam, partly making the project a jobs project by doing things in a human intensive way. (of course you could go back to the hand push non powered reel mower but then you have to worry about folks and heart attacks. (Or use those in their 20s for this. Growing up in MI and In this is how we mowed the yard. (in the 1950s and 1960) and for snow shoveling, my dad got a snow blower when I went off to college.
Now if you really want a low productivity way of cutting grass get one of the hand grass trimmers and set to work cutting it by that, it would employ a lot of folks and not have the exertion problem of a push mower (Again I used these in the 1960s in MI before we had the string trimmers and edgers etc. (also recall the old hand powered lawn edgers.)

craazyboy , May 17, 2017 at 8:19 pm

I'm partial to John Cleese Silly Walks. It would be creative and artistic. We need more art.

Samuel Conner , May 17, 2017 at 9:46 pm

It sounds like the CAP JG proposal is "top down" in that the "palette" of jobs to be funded is decided by the same agency (or an agency at the same level of government) as the fund disbursement authority, or is specified in the law itself.

IIRC, the JG concept proposed in the MMT primer would devolve the decision of "how to usefully employ willing underutilized workers" to local level. Funding would still be Federal. There would be some kind of "request for proposals/peer review" process to decide which locally-wanted projects would receive JG dollars (presumably in order to be a guarantee, enough projects would be approved for every locality to employ the available under-utilized willing workforce. If a locality only proposed one project, that would be funded)

It that right, Lambert? Is "top down" another way that centrists could screw up a JG? And might the "local devolution" aspect of the NEP/MMT Primer concept appeal to folks on the right?

washunate , May 18, 2017 at 12:13 am

Great write up. I obviously have a long-running disagreement on the policy prescription of JG, but I do find it interesting talking about how groups like CAP present it outside the specific confines of MMT (and, apparently, without even tipping the hat to them ?).

One concrete bit of info I would love to know is how they estimate 4.4 million workers for take-up. First, it's a hilarious instance of false precision. Second, it's remarkably low. $15/hr is approximately the median wage. Tens of millions of workers would sign up, both from the ranks of the crap jobs and from the ranks of those out of the labor force.

[May 16, 2017] Mohamed El-Erian: We get signals that the system is under enormous stress

Notable quotes:
"... "The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up." ..."
"... Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse." ..."
May 16, 2017 | www.theguardian.com

Leading economist and investor believes world leaders, and global capitalism, have reached fork in road between equality and chaos

This is the nub of El-Erian's analysis of why the developed world is approaching a fork in the road. The inequality generated by the current low-growth climate has three elements: inequality of wealth, income and opportunity. The last of the three – manifested in high youth unemployment in many eurozone countries, for example – is the most explosive element.

"The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up."

... ... ...

How do we take the high, benign road? El-Erian has a four-point plan.

First, "we need to get back to investing in things that promote economic growth, infrastructure, a more pro-growth tax system for the US, serious labour retooling ... If you're in Europe, youth employment is an issue you've really got to think about very seriously."

Second, countries that can afford to do so must "exploit the fiscal space," meaning borrowing to invest or cutting taxes. He puts the US and Germany unambiguously in that category "and to a certain extent the UK".

Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse."

Fourth, regional and global governance needs repair. He compares the eurozone to a stool with one-and-a-half legs instead of four. The complete leg is monetary union, the half is banking union. The missing legs are fiscal integration, meaning a common budget, and political harmonisation. No wonder the eurozone is unstable, he says: "You can do three legs, you can't do one and half."

To return to El-Erian's core T-junction analogy, none of the required manoeuvres sound easy. "You don't need a big bang," he replies. "If you want to take the good turn you have to see some progress on some of these elements. If you don't, then we take the other turn." He ascribes equal probabilities – "it's a political judgment."

What's an investor to do? El-Erian says his own approach, which he admits is hard for the average person to copy, is framed like a bar-bell. At one end, he's invested in high-risk startups where you don't need all to succeed. At the other, he's in cash and cash-like investments. In the middle, he'll invest in public markets only tactically.

The bottom line: "I'm risk off."

[May 12, 2017] How Financialization and the New Economy Hurt Science and Engineering Grads

Notable quotes:
"... Weinstein argues that the GUI agenda (inspired by Reaganomics) sought to prevent these salary increases. He contends that the legislation that enabled this oversupply was the Immigration Act of 1990 that expanded the H-1B nonimmigrant visa program and instituted employment-based immigration preferences. ..."
"... As I show in my book Sustainable Prosperity in the New Economy? , the beginning of the end of CWOC was the transformation of IBM, the world's leading computer company, from OEBM to NEBM from 1990 to 1994. In 1990, with 374,000 employees, IBM still bragged about its adherence to the CWOC norm (calling it "lifelong employment"), claiming that the company had not laid off anyone involuntarily since 1921. By 1994 IBM had 220,000 employees, and, with senior executives under CEO Louis Gerstner themselves getting fired for not laying off employees fast enough, CWOC was history. Over the course of the 1990s and into the 2000s, other major Old Economy companies followed IBM's example, throwing out of work older employees, many of them highly educated and with accumulated experience that had previously been highly valued by the companies. ..."
"... The salaries of S&E employees tended to increase with years of experience with the company, with a defined-benefit pension (based on years of service and highest salary levels) in retirement. These types of secure employment relations, and the high and rising pay levels associated with them, were the norm among established high-tech companies in the mid-1980s, but, as exemplified by IBM's transformation, started to become undone in the early 1990s, and were virtually extinct a decade later, as Old Economy companies either made the transition to the NEBM, or disappeared.8 The culprit in the weakening in the demand for, and earnings of, S&E PhDs from the early 1990s was the demise of CWOC-a phenomenon that Weinstein (and Teitelbaum) entirely ignore. ..."
"... As exemplified by IBM in the 1990s and beyond, a company's stock price could be raised by laying off expensive older workers and using the resultant "free" cash flow (as the purveyors of MSV called it) to do stock buybacks. 12 ..."
"... "But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO." ..."
"... During that period, the only job market for native PhD STEM students became the American Defense and Intelligence agencies, because they required security clearances and US Citizenship. I found myself driven in those directions too. ..."
"... Technology for the most part is just increasing complexity and increasing complexity has diminishing returns. With energy becoming less available, we probably need a lot less complexity. ..."
"... I wouldn't say that there is a lack of R&D - it just isn't done in-house any more. Gone are the Bell Labs and the Xerox PARCs; welcome to the brave new world of university partnerships and non-profit R&D shops (most famous: the Southwest Research Institute). ..."
"... Basically the rich are waging class war. That's the problem no matter how you slice and dice this one. This whole "New Economy" has been one big war on wages. I mean look at the collusion too between Google, Apple, and Intel to keep wages low. ..."
"... Basically it comes down to, the rich are really greedy. The issue right now for the rich is that they are desperate to keep the looting from happening, while people are increasingly aware that the system is against them. Bernie Sanders got a lot of support in the Valley and while it is a very Democratic leaning area, I cannot imagine that Trump's anti-H1B and L1B stance would have been opposed by the average employee. I think that the rich are not going to concede anything and that there needs to be some sort of solidarity union amongst all workers. ..."
"... Is there a single person here who has worked on Wall Street (writ large) who can convince us that his job or his company had an overall positive effect on the US and/or world economy over five years, ten years, or twenty-five years? ..."
"... Its not just PhDs. I know several Engineers who advise their children to do something else. It's just not worth the amount of effort that is required to be put into it and there is no future hope of a turn around. As bad as it is for graduates today, it's only going to get worse. ..."
"... They're catching up with us arts and humanities majors. Sad! ..."
"... I am a civil engineer and one of my daughters is studying to become a structural engineer. I would not have advised her to go into engineering because of the problem with the H-1B visas. ..."
"... But who am I to advise? Who can know the future? The world is just changing too fast now to really be able to advise our children on what careers to take. Besides, one of the advantages of studying engineering as you can work anywhere in the world. ..."
"... Post WWII labor overplayed its hand by the 1970's. Corporations and their decided they had had it. Corps and management proceeded to change the rules of the game on everything -- courts, trade, taxation and regulation. These countermeasures have had disastrous long term consequences. Corporations now run the country in a fascist manner. Government capture has created myriad problems beyond financialization, only one tool in the corporate quiver. Oligopolies across most to all industries comes to mind. Rail, air, health insurance, banking, defense, telecom, entertainment . ..."
"... Not sure about the labor part overplaying their hand. They just wanted an even wage and productivity rise. It is capital IMO that has overplayed its hand and the rise of neoliberal economics which has led to declines in public R&D spending. There isn't anything like the Space Race anymore. ..."
"... Frankly, labour underplayed its hand. At one point it had capital by the throat, and should have finished it off then. If peace is not an option, you should utterly and permanently destroy your enemy. ..."
"... Labor did NOT overplay its hand after WW2 - Taft-Hartley was a HUGE smack-down to labor after the privations of the Depression followed by the war effort. The decent wages during the post-war period were part of a concerted effort to convince workers that they didn't need unions and to be complacent. ..."
"... Labor leadership certainly became corrupt from all the money sloshing around without global competition due to war devastation of Europe and Japan, the Cold War, and the death throes of colonialism, but this was not due to "overplaying" their hand. ..."
"... Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation. ..."
"... Actually though, watching the train wreck that is the outlook for the youngest generation today, provides some grim amusement. For instance noting that the "bubble-driven" economy composed of companies desperate to prevent their stock becoming "badly diluted" by having fire sales on capitol and expertise that probably took their predecessors decades to build can really only have one outcome. Depression, misery, socialism. Maybe we skip the Mao route this time, maybe not. ..."
"... Gregory Peck: "The Robber Barons of old at least left something tangible in their wake - a coal mine, a railroad, banks. THIS MAN LEAVES NOTHING. HE CREATES NOTHING. HE BUILDS NOTHING. HE RUNS NOTHING. And in his wake lies nothing but a blizzard of paper to cover the pain. Oh, if he said, "I know how to run your business better than you," that would be something worth talking about. But he's not saying that. He's saying, "I'm going to kill you because at this particular moment in time, you're worth more dead than alive." https://www.youtube.com/watch?v=xJRhrow3Jws ..."
"... IBM. Poster child of everything wrong at the executive-level and the shareholder-level. ..."
"... Yes, the IBM reference is interesting.The author gives an ordinal lead to IBM as a mover from the OEBM to NEBM. I ask myself if, from a mere one large corporation managing perspective, this was IBM's 11th hour response to the by then devastating rise of its competitors like Apple & Microsoft. ..."
"... Also the irony that it did not help IBM at least in the midterm. So, IBM was the prime mover to initiate some aspects of a model change -change which every major player adhered to- in response to a new technological disadvantage vs. competitors, and in turned did not seem to do much for IBM in the immediate years. Although, if I recall well, IBM was immersed in many political battles and internal problems, legal and otherwise. Nevertheless, I doubt there was a historic inevitability on IBM's ordinal force. Outstanding work by Lazonick ..."
"... "IBM is the poster child for shenanigans. Last month, IBM reported its 20th quarter in a row of declining year over year revenues .. a 13% drop in earnings, profit margins that declined in every business segment ( much worse than expected ), free cash flow that plummeted over 50% year over year and an earnings "beat" of 3 cents per share. How could this "beat" happen? .. a negative tax rate of -23% . This is why they pay the CEO Rometti the big bucks ( estimated at $50 to $65 million last year)." ..."
"... And this is one of the Bluest of the Blue Chip companies in the world. ..."
"... Amazon has lost money every fucking quarter for the last 20 fucking years, and that Bezos motherfucker is the king. ..."
"... In addition, the rise of 401(k) based investing, in which workers are tax-incentivized to buy in to the corporate stock scheming, but lack the normal shareholder voice in corporate governance, has taken the chains off the looters as well. ..."
"... The impact on the Grads was secondary a byproduct of a larger agenda which included the transfer offshore and consolidation of "IP" of the entire American, EU and Asian industrial economies along with the withdrawl of capital, while at the same time intentionally sabotaging future innovations with the handicap of diversity. Who got the loot and capital? Usual suspects. ..."
May 12, 2017 | www.nakedcapitalism.com

... By William Lazonick, professor of economics at University of Massachusetts Lowell. Originally published at the Institute for New Economic Thinking website

How the U.S. New Economy Business Model has devalued science & engineering PhDs This note comments on Eric Weinstein's, " How and Why Government, Universities, and Industries Create Domestic Labor Shortages of Scientists and High-Tech Workers ," posted recently on INET's website.

At the outset of his paper, Weinstein argues that:

Long term labor shortages do not happen naturally in market economies. That is not to say that they don't exist. They are created when employers or government agencies tamper with the natural functioning of the wage mechanism.

The contention, written from the perspective of the late 1990s, is that in the first half of the 1990s an oversupply ("a glut") of science and engineering (S&E) labor that depressed the wages of PhD scientists and engineers was primarily the result of the promotion of a government-university-industry (GUI) agenda, coordinated by the National Science Foundation under the leadership of Erich Bloch, head of the NSF from 1984 to 1990. Beginning in 1985, the NSF predicted a shortfall of 675,000 S&E personnel in the U.S. economy over the next two decades. According to a study by the NSF's Policy Research and Analysis (PRA) division, quoted by Weinstein, salary data show that real PhD-level pay began to rise after 1982, moving from $52,000 to $64,000 in 1987 (measured in 1984 dollars). One set of salary projections show that real pay will reach $75,000 in 1996 and approach $100,000 shortly beyond the year 2000.

Weinstein argues that the GUI agenda (inspired by Reaganomics) sought to prevent these salary increases. He contends that the legislation that enabled this oversupply was the Immigration Act of 1990 that expanded the H-1B nonimmigrant visa program and instituted employment-based immigration preferences. Given that most of these foreigners came from lower-wage (Asian) nations, it is assumed that they were attracted to work in the United States by what for them were high wages, whereas Americans with S&E PhDs began to shun S&E careers as the salaries became less attractive.1

There is a lot missing from Weinstein's perspective, which is also the perspective of demographer Michael Teitelbaum, who Weinstein cites extensively and who was at the Sloan Foundation from 1983 to 2013, rising to Vice-President in 2006. Weinstein and Teitelbaum view the salaries of scientists and engineers as being determined by supply and demand on the labor market ("the natural wage rate" and "the natural functioning of the labor market"). From this (neoclassical) perspective, they completely ignore the "marketization" of employment relations for S&E workers that occurred in the U.S. business sector from the mid-1980s as well as the concomitant "financialization" of the U.S. business corporation that remains, in my view, the most damaging economic problem facing the United States. This transformation of employment relations put out of work large numbers of PhD scientists and engineers who previously had secure employment and who enjoyed high incomes and benefits as well as creative corporate careers. The marketization of employment relations brought to an end of the norm of a career with one company (CWOC)-an employment norm that was pervasive in U.S. business corporations from the 1950s to the 1980s, but that has since disappeared. 2 The "financialization" of the corporation, manifested by massive distributions to shareholders in the forms of cash dividends and stock buybacks, undermined the opportunities for business-sector S&E careers.

The major cause of marketization was the rise of the "New Economy business model" (NEBM) in which high-tech startups, primarily in information-and-communication technology (ICT) and biotechnology, lured S&E personnel away from established companies, which offered CWOC under the "Old Economy business model" (OEBM). As startups with uncertain futures, the New Economy companies could not realistically offer CWOC, but instead enticed S&E personnel away from CWOC at Old Economy companies by offering these employees stock options on top of their salaries (which were typically lower than those at the Old Economy companies). The stock options could become extremely valuable if and when the startup did an initial public offering (IPO) or a merger-and-acquisition (M&A) deal with an established publicly-listed company.

The rise in S&E PhD salaries from 1982 to 1987, identified in the NSF study that Weinstein quotes, was the result of increased demand for S&E personnel by New Economy companies, with some of the increase taking the form of stock-based pay, which in the Census data drawn from tax returns is lumped in with salaries.3 Competing with companies for S&E personnel, the rise of the NEBM in turn put pressure on salaries at Old Economy companies as they tried to use CWOC to attract and retain S&E labor in the face of the stock-based alternative. By the last half of the 1980s, this New Economy competition for talent was eroding the learning capabilities of the corporate research labs that, in many cases from the early twentieth century, had been a characteristic feature of Old Economy companies in a wide range of knowledge-intensive industries. 4

The CWOC norm under OEBM had provided employment security and rising wages from years-of-service with the company and internal promotion of S&E personnel (significant proportions of whom in science- based companies had PhDs). As I show in my book Sustainable Prosperity in the New Economy? , the beginning of the end of CWOC was the transformation of IBM, the world's leading computer company, from OEBM to NEBM from 1990 to 1994. In 1990, with 374,000 employees, IBM still bragged about its adherence to the CWOC norm (calling it "lifelong employment"), claiming that the company had not laid off anyone involuntarily since 1921. By 1994 IBM had 220,000 employees, and, with senior executives under CEO Louis Gerstner themselves getting fired for not laying off employees fast enough, CWOC was history. Over the course of the 1990s and into the 2000s, other major Old Economy companies followed IBM's example, throwing out of work older employees, many of them highly educated and with accumulated experience that had previously been highly valued by the companies.

Already in the early 1990s, the marketization of employment relations was responsible for a precipitous decline of employment at the corporate research labs that had underpinned the twentieth-century growth of Old Economy high-tech companies, of which IBM was an exemplar. In 1993, a conference held at Harvard Business School decried the "end of an era" in industrial research, with papers from the conference appearing in a volume Engines of Innovation , published in 1996.5 In the introductory chapter, entitled "Technology's Vanishing Wellspring," conference organizers and volume editors Richard Rosenbloom and William Spencer argued that industrial research (as distinct from product development) of the type that had been carried out by corporate labs in the "golden era" of the post- World War II decades "expands the base of knowledge on which existing industries depend and generates new knowledge that leads to new technologies and the birth of new industries." In the more competitive environment of the 1980s and 1990s, however, in the new industries of "biotechnology, exotic materials, and information products (and services based on them)", Rosenbloom and Spencer observed that it was more difficult for companies "to keep new technologies fully proprietary", and hence "research activities have been downsized, redirected, and restructured in recent years within most of the firms that once were among the largest sponsors of industrial research." 6

There is little doubt that S&E PhDs were major victims of this transformation. But the problem that they, along with most other members of the U.S. labor force, have faced is not simply the marketization of employment relations. For reasons that I have fully described in my publications cited above, the transition from OEBM to NEBM was accompanied by the "financialization" of the U.S. business corporation as, from the last half of the 1980s, U.S. boardrooms and business schools embraced the ideology that, for the sake of superior economic performance, a business enterprise should be run to "maximize shareholder value" (MSV). Instead of retaining employees and reinvesting in their productive capabilities, as had been the case when CWOC had prevailed, MSV advocated and legitimized the downsizing of the company's labor force and the distribution of corporate revenues to shareholders in the forms of both cash dividends and stock repurchases. 7

With the demise of CWOC, older employees were the most vulnerable, not only because they tended to have the highest salaries, but also because the shift from OEBM to NEBM was a shift from proprietary technology systems, in which employees with long years of experience were highly valued, to open technology systems that favored younger workers with the latest computer-related skills (often acquired by working at other companies). Under CWOC, older employees were more expensive not because of a "natural wage rate" that was the result of supply and demand on the S&E labor market, but because of the internal job ladders that are integral to a "retain-and-reinvest" resource-allocation regime. The salaries of S&E employees tended to increase with years of experience with the company, with a defined-benefit pension (based on years of service and highest salary levels) in retirement. These types of secure employment relations, and the high and rising pay levels associated with them, were the norm among established high-tech companies in the mid-1980s, but, as exemplified by IBM's transformation, started to become undone in the early 1990s, and were virtually extinct a decade later, as Old Economy companies either made the transition to the NEBM, or disappeared.8 The culprit in the weakening in the demand for, and earnings of, S&E PhDs from the early 1990s was the demise of CWOC-a phenomenon that Weinstein (and Teitelbaum) entirely ignore.

With the rise of NEBM, companies wanted employees who were younger and cheaper , and that was the major reason why at the end of the 1980s the ICT industry pushed for an expansion of H-1B nonimmigrant visas and employment-based immigration visas. It is not at all clear that an influx of PhDs from foreign countries via these programs was undermining the earnings of S&E PhDs in the early 1990s. Most H-1B visa holders had Bachelor's degrees when they entered the United States. At the same time, large numbers of non-immigrant visa holders entered the United States on student visas to do Master's and PhD degrees, and then looked to employment on H-1B visas to enable them to stay in the United States for extended periods (up to seven years).9 It was in response to the availability of advanced- degree graduates of U.S. universities that in 2005 an additional 20,000 H-1B visas were added to the normal cap of 65,000. Without the influx of foreign students into U.S. S&E Master's and PhD programs, many of these programs would not have survived. Through this route, the H-1B visa program has made more foreign-born PhDs available to corporations for employment in the United States. But I posit that it has been the demise of OEBM and rise of the NEBM, not an increased supply of foreign-born PhDs, that has placed downward pressure on the career earnings of the most highly educated members of the U.S. labor force.

Besides giving employers access to an expanded supply of younger and cheaper high-tech labor in the United States, the H-1B visa along with the L-1 visa for people who had previously worked for the employer for at least one year outside the United States have another valuable attribute for employers: the person on the visa is immobile on the labor market-he or she can't change jobs-whereas under NEBM the most valued high-tech workers are those who are highly mobile. This mobility of labor can boost the worker's pay package but is highly problematic for a company that needs these employees to be engaged in the collective and cumulative learning processes that are the essence of generating competitive products. Under OEBM, CWOC was the central employment institution for college-educated workers precisely because of the need for collective and cumulative learning. But it was the rise of NEBM, not the Immigration Act of 1990, that undermined CWOC. The growing dominance of NEBM with its open systems architectures then led employers to make increased use of H-1 and L-1 visas in the 1980s, prompting them to get behind an expanded cap for H-1B visas in the Immigration Act of 1990. 10

Once OEBM was attacked by NEBM, with its offer of stock-based pay, these corporations became fertile territory for the adoption of the ideology that a company should be run to "maximize shareholder value" (MSV). This momentous transformation in U.S. corporate governance occurred from the late 1980s, legitimizing the transition from a "retain-and-reinvest" to a "downsize-and-distribute" corporate- governance regime. In the 1990s and beyond, this corporate-governance transformation laid waste to CWOC across corporate America, knowledge-intensive companies included. 11 With corporate research eroding as high-tech personnel responded to the lure of stock-based pay from NEBM companies- including not only startups but also those such as Intel, Microsoft, Oracle, Sun Microsystems, and Cisco Systems that during the 1990s grew to employ tens of thousands of people, most of them with stock- based pay-senior executives at the Old Economy high-tech companies began to see their company's stock price as not only key to the size of their own stock-based pay packages but also as an instrument to compete for a broad-based of high-tech personnel. As exemplified by IBM in the 1990s and beyond, a company's stock price could be raised by laying off expensive older workers and using the resultant "free" cash flow (as the purveyors of MSV called it) to do stock buybacks. 12

As I have documented in detail, over the past three decades this legalized looting of the U.S. business corporation has only gotten worse. As shown Table 1, driven by stock buybacks, net equity issues by U.S. nonfinancial corporations were, in 2015 dollars, minus $4.5 trillion over the decade 2006-2015. In 2016 net equity issues were minus $586 billion. Net equity issues are new stock issues by companies (in this case nonfinancial corporations) minus stock retired from the market as the result of stock repurchases and M&A deals. The massively negative numbers in recent decades are the result of stock buybacks. I have calculated net equity issues as a percent of GDP by decade to provide a measure of the value of buybacks done relative to the size of the U.S. economy. In both absolute inflation-adjusted dollars and as a percent of GDP, buybacks have become a prime mode of corporate resource allocation in the U.S. economy. Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation.

Table 1: Net equity issues of nonfinancial corporations in the United States, 1946-2015, by decade, in 2015 dollars, and as a percent of GDP

Decade Net Equity Issues,

2015$ billions

Net Equity Issues

as % of GDP

1946-1955 143.2 0.56
1956-1965 110.9 0.30
1966-1975 316.0 0.58
1976-1985 -290.9 -0.40
1986-1995 -1,002.5 -1.00
1996-2005 -1,524.4 -1.09
2006-2015 -4,466.6 -2.65

Source: Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release Z.1, "Financial Accounts of the United States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic Accounts," Table F-223: Corporate Equities, March 9, 2017, at https://www.federalreserve.gov/releases/z1/current/ .

Over the years 2006-2015, the 459 companies in the S&P 500 Index in January 2016 that were publicly listed over the ten-year period expended $3.9 trillion on stock buybacks, representing 53.6 percent of net income, plus another 36.7 percent of net income on dividends. Much of the remaining 9.7 percent of profits was held abroad, sheltered from U.S. taxes. Mean buybacks for these 459 companies ranged from $291 million in 2009, when the stock markets had collapsed, to $1,205 million in 2007, when the stock market peaked before the Great Financial Crisis. In 2015, with the stock market booming, mean buybacks for these companies were $1,173 million. Meanwhile, dividends declined moderately in 2009, but over the period 2006-2015 they trended up in real terms.

Among the largest repurchasers are America's premier high-tech companies. Table 2 shows the top 25 repurchasers over the decade 2006-2015. Among the companies that one would expect to employ large numbers of S&E PhDs are Exxon Mobil, Microsoft, IBM, Apple, Cisco Systems, Hewlett Packard, Pfizer, Oracle, Intel, General Electric, Johnson & Johnson, Chevron, and ConocoPhillips. We do not know the historical numbers of S&E PhDs at these companies, but I hypothesize that numbers would be much higher than they are if the companies were not financialized. Many of America's largest corporations

routinely distribute more than 100 percent of net income to shareholders, generating the extra cash by reducing cash reserves, selling off assets, taking on debt, or laying off employees.13 As I have shown, the only logical explanation for this buyback activity is that the stock-based pay that represents the vast majority of the remuneration of senior corporate executives incentivizes them to manipulate their companies' stock prices, leaving most Americans worse off. 14

Table 2: The 25 largest stock repurchasers among U.S.-based corporations, 2006-2015, showing net income (NI) stock buybacks (BB), and cash dividends (DV)

Source: Calculated from data downloaded from Standard & Poor's Compustat database.

The Weinstein-Teitelbaum focus on a GUI design to expand the supply of S&E PhDs ignores the transformations of corporate governance and employment relations that have decimated career employment for this group of workers over the past three decades. At the same time, the channeling of trillions of dollars of value created in U.S. nonfinancial corporations to the financial sector has opened up jobs on Wall Street that can provide quick income bonanzas for highly-educated members of the U.S. labor force, many of whom might have otherwise pursued S&E careers. Among the wealthiest of these Wall Street players are corporate predators-euphemistically known as "hedge-fund activists"-who have billions of dollars in assets under management with which they can attack companies to pump up their stock prices through the implementation of "downsize-and-distribute" allocation regimes and, even if it takes a few years, dump the stock for huge gains.15

In the case of Apple, we have shown how Carl Icahn used his wealth, visibility, hype, and influence to take $2 billion in stock-market gains by buying $3.6 billion of Apple shares in the summer of 2013 and selling them in the winter of 2016, even though he contributed absolutely nothing of any kind to Apple as a value-creating company.16 Apple CEO Tim Cook and his board (which includes former U.S. Vice President Al Gore) helped Icahn turn his accumulated fortune into an even bigger one by having Apple repurchase $45 billion in shares in 2014 and $36 billion in 2015-by far the two largest one-year stock buybacks of any company in history. Imagine the corporate research capabilities in which Apple could have invested, and the S&E PhDs the company could have employed, had it looked for productive ways to use even a fraction of the almost unimaginable sums that it wasted on buybacks.17 From 2011 through the first quarter of 2017, Apple spent $144 billion on buybacks and $51 billion on dividends under what it calls its "Capital Return" program. But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO. 18

A number of "hedge-fund activists"-Nelson Peltz of Trian, Daniel Loeb of Third Point, and William Ackman of Pershing Square are among the most prominent-have been able to put up one or two billion dollars to purchase small stakes in major high-tech companies, and, with the proxy votes of pension funds, mutual funds and endowments, have been able put pressure on companies, often by placing their representatives on the boards of directors, to implement "downsize-and-distribute" regimes for the sake of "maximizing shareholder value."19 In the summer of 2013, Nelson Peltz's Trian Fund Management bought DuPont stock worth $1.3 billion, representing 2.2% of shares outstanding. In May 2015 Peltz lost a proxy fight to put four of his nominees on the DuPont board, but in October 2015 DuPont CEO Ellen Kullman, who had opposed Peltz, resigned, and the new management began to implement Peltz's plans to cut costs and hit financial targets, to be done in the context of a merger with Dow Chemical, which had fallen into the hands of another corporate predator Daniel Loeb. Meanwhile, in October 2015, Peltz bought 0.8 percent of the shares of General Electric (GE), and began to pressure another iconic high-tech company to cut costs and increase its stock price. GE was already a financialized company that had done $52 billion in buybacks in the decade 2006-2015 (see Table 2)-a massive amount of money for the purpose of manipulating its stock price. Undoubtedly responding to additional pressure from Peltz, during 2016, GE, with profits of $8.0 billion, paid out $8.5 billion in dividends and spent another $22.0 billion on buybacks. This financialization of U.S. high-tech corporations undermines, among other things, the employment of S&E PhDs.

We need research on this subject to quantify its impacts. I submit, however, that such a research agenda must focus on transformations of regimes of corporate governance and employment relations. Relying on the neoclassical economist's notion of a "natural wage rate" determined by the interaction of supply and demand, Weinstein, a mathematician, and Teitelbaum, a demographer, missed the transformations in corporate governance and employment relations that marked the late 1980s and early 1990s-and beyond-and as result, in my view, failed to understand the changing fortunes of S&E PhDs in the marketized, globalized, and financialized New Economy. Given the dominance of what I have called "the myth of the market economy"20 in the thought processes of economists, Weinstein and Teitelbaum were by no means alone in erroneously focusing on supply and demand on the PhD labor market while failing to recognize the centrality of corporate governance and employment relations in determining the earnings and career prospects of S&E PhDs. It is time for new economic thinking on these critical questions.

Footnotes

Tom_Doak , May 12, 2017 at 10:08 am

It was indeed a tough article to read to the end, but this nugget near the end was worth it:

"But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO."

Wow!

David McClain , May 12, 2017 at 10:10 am

As one who actually lived this process, I can tell you that the premise of this article must be basically true.

Back in the early '90s I set out to fill in the gaps of my own computer science background (I'm actually an astrophysicist). And my classes were filled entirely by people from Asia, except for myself and one other Anglo. Job ads in the journals were already beginning to ask for PhD level CompSci with emphasis on, e.g., voice recognition, for a pay rate of $26K (1992 !). That was definitely appealing to the foreign students and unappealing to American STEM students.

During that period, the only job market for native PhD STEM students became the American Defense and Intelligence agencies, because they required security clearances and US Citizenship. I found myself driven in those directions too.

Now, after many years doing my own thing, I look around at the STEM marketplace and I am shocked to find large numbers of compatriots being pressured into the GIG Economy, and pay rates are appalling by former standards. There is a serious lack of expenditure on research and development today.

tony , May 12, 2017 at 10:44 am

There is a serious lack of expenditure on research and development today.

From another perspective this is just over investment in education. Technology for the most part is just increasing complexity and increasing complexity has diminishing returns. With energy becoming less available, we probably need a lot less complexity.

flora , May 12, 2017 at 10:49 am

"American Defense". hmmm, wonder if sending the jobs and know-how to China and India in the belief both will always be the US's willing subcontractors is such a good idea (from a US national defense point of view).

Ranger Rick , May 12, 2017 at 1:14 pm

I wouldn't say that there is a lack of R&D - it just isn't done in-house any more. Gone are the Bell Labs and the Xerox PARCs; welcome to the brave new world of university partnerships and non-profit R&D shops (most famous: the Southwest Research Institute).

Altandmain , May 12, 2017 at 10:21 am

Basically the rich are waging class war. That's the problem no matter how you slice and dice this one. This whole "New Economy" has been one big war on wages. I mean look at the collusion too between Google, Apple, and Intel to keep wages low.

https://www.wired.com/2015/01/apple-google-tech-giants-reach-415m-settlement-poaching-suit/

Considering how slap on the wrist this was, what incentive is there to not do it again? They know they can get away with this. Not to mention, this H1B and L1B program has become a way to keep wages low in the technology sector. In many sectors, there really isn't a "shortage" of Americans. Oh and for all the talk of these companies being "innovative", if they are prioritizing money on stock buybacks over R&D, that's not really innovative as much as it is trying to boost salaries by capitalizing on the huge cash reserves they get for being the dominant companies in their sector. Same could be said about Exxon. Not much being spent on R&D means that they are more about rent seeking rather than innovation. Perhaps not yet as blatant as those patent trolls, which are little more than shell companies that sue other companies over patents, but that is their ideal business model.

I think that at the end of the day, even though many engineers in the tech companies are in the top 10% in terms of income percentile, their interests are closer aligned with working class people. The other issue is that I bet when many of these engineers turn into their 40s, they are going to witness first hand the very real age discrimination that exists in the technology industry.

Basically it comes down to, the rich are really greedy. The issue right now for the rich is that they are desperate to keep the looting from happening, while people are increasingly aware that the system is against them. Bernie Sanders got a lot of support in the Valley and while it is a very Democratic leaning area, I cannot imagine that Trump's anti-H1B and L1B stance would have been opposed by the average employee. I think that the rich are not going to concede anything and that there needs to be some sort of solidarity union amongst all workers.

Expat , May 12, 2017 at 10:39 am

Is there a single person here who has worked on Wall Street (writ large) who can convince us that his job or his company had an overall positive effect on the US and/or world economy over five years, ten years, or twenty-five years?

I'll go first: three investment banks under my belt and one was a giant financial and moral sucking machine called Citi. The other two were wannabe's but certainly did not add value.

Sluggeaux , May 12, 2017 at 11:12 am

While "maximizing shareholder value" is the huge problem wrecking our economy, having watched the genesis of New Economic Paradigm through the experiences my wife and most of my friends going through the Silicon Valley start-up Tulip-mania from the mid-'80's through the first decade of th e 2000's, the author is hitting important points while over-simplifying and missing other equally important points, such as the role of the "Peace Dividend" in the collapse of aerospace and research funding, and the role of the Reagan and Clinton "tax reforms" in driving stock-based compensation systems.

Early on, the use of stock-based compensation drove down wage-based compensation and increased the role of financial speculators. Today, the speculators get the stock, but wages remain suppressed and only foreign workers will accept them. The author is correct: the causes are complicated, but the result drove down wages and job security for STEM workers.

mary , May 12, 2017 at 11:30 am

I got my Ph.D. in biology in 2000. It was absolutely the worst decision in my life. In fact, it actually destroyed my life, reducing me to near homelessness and starvation because-GASP--regular employers (like office jobs, retail etc.) will not hire Ph.D.s. There there is the lovely student debt that has grown exponentially, as my wages could not make the smallest dent. Convicted felons make more that I do. So to make a long story short, I started a small on-line business 9 years ago and got the FFFFF OUT of the rotten POS United States and moved to Ecuador, one of the most progressive countries in the world. I cannot believe how the US abuses its national treasures-is is truly a POS and I do not miss it for one day. I hope the US crashes and rots in hell.

JDS , May 12, 2017 at 1:45 pm

Good for you! I wish I could do the same that is, leave the country!

visitor , May 12, 2017 at 2:55 pm

Out of curiosity: what happened to your student debt when you emigrated?

fritter , May 12, 2017 at 11:40 am

Its not just PhDs. I know several Engineers who advise their children to do something else. It's just not worth the amount of effort that is required to be put into it and there is no future hope of a turn around. As bad as it is for graduates today, it's only going to get worse.

nycTerrierist , May 12, 2017 at 12:21 pm

They're catching up with us arts and humanities majors. Sad!

B1whois , May 12, 2017 at 1:14 pm

I am a civil engineer and one of my daughters is studying to become a structural engineer. I would not have advised her to go into engineering because of the problem with the H-1B visas.

But who am I to advise? Who can know the future? The world is just changing too fast now to really be able to advise our children on what careers to take. Besides, one of the advantages of studying engineering as you can work anywhere in the world.

I bought houses for each of my children and told them if they wanted to go to college they could trade the house in for the education. I personally think they should have considered keeping the house and working minimum wage jobs that they enjoy. But both of them are pursuing educations, my son to be history teacher!

cr , May 12, 2017 at 12:01 pm

Post WWII labor overplayed its hand by the 1970's. Corporations and their decided they had had it. Corps and management proceeded to change the rules of the game on everything -- courts, trade, taxation and regulation. These countermeasures have had disastrous long term consequences. Corporations now run the country in a fascist manner. Government capture has created myriad problems beyond financialization, only one tool in the corporate quiver. Oligopolies across most to all industries comes to mind. Rail, air, health insurance, banking, defense, telecom, entertainment .

But this paper is also lamenting a lack of business capex, which is directly correlated to public investment. When you decided to offshore manufacturing and fail to invest in infrastructure you get a double whammy that hits business capex. Increasing regulation and taxation on small and midsize companies has lead to consolidation. Approximately 5000 public companies have likely been consolidated. Sarbanes-Oxley added millions to compliance costs making it highly uneconomical to be a public company with less than $300 million in revenue. Dodd-Frank has created increases in cost for financial firms that had nothing to do with the crisis. In fact, the big banks have benefited enormously from implementation of this legislation.

Vatch , May 12, 2017 at 12:20 pm

For anyone else who was confused by the terminology, as I was briefly, capex = capital expenditure.

Altandmain , May 12, 2017 at 1:13 pm

Not sure about the labor part overplaying their hand. They just wanted an even wage and productivity rise. It is capital IMO that has overplayed its hand and the rise of neoliberal economics which has led to declines in public R&D spending. There isn't anything like the Space Race anymore.

tony , May 12, 2017 at 3:20 pm

Frankly, labour underplayed its hand. At one point it had capital by the throat, and should have finished it off then. If peace is not an option, you should utterly and permanently destroy your enemy.

Sluggeaux , May 12, 2017 at 4:53 pm

Labor did NOT overplay its hand after WW2 - Taft-Hartley was a HUGE smack-down to labor after the privations of the Depression followed by the war effort. The decent wages during the post-war period were part of a concerted effort to convince workers that they didn't need unions and to be complacent.

Labor leadership certainly became corrupt from all the money sloshing around without global competition due to war devastation of Europe and Japan, the Cold War, and the death throes of colonialism, but this was not due to "overplaying" their hand.

allan , May 12, 2017 at 12:15 pm

Reply to cr@May 12, 2017 at 12:01 pm

Sarbanes-Oxley Dodd-Frank

The trends described in the post predate by decades the communist tyranny [/s] imposed by those bills.
The wholesale closing or offshoring of corporate research labs already started in the 1980s,
driven in part by corporate raiders like Milken, Pickens and Icahn.
IBM, GM, Kodak, Xerox, GE they all had labs that provided jobs to STEM graduates
and a stream of discoveries and inventions to generate more jobs.
Now these are largely gone or substantially off-shored.
What has happened to corporate R&D shouldn't be used as an excuse to make life easier
for the Wall Street culture largely responsible for it.

Vatch , May 12, 2017 at 12:22 pm

Yes, any burdens imposed by Sarbanes Oxley are the fault of numerous unethical business executives over recent decades, and not the fault of people in government.

visitor , May 12, 2017 at 3:02 pm

When I was a student in IT, the shining stars at the firmament of industrial computer science and engineering R&D were Xerox PARC, DEC SRC, ATT Bell Labs and IBM Yorktown Heights.

They are gone or a shadow of their former selves.

Science Officer Smirnoff , May 12, 2017 at 12:36 pm

Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation.

William Lazonick, "Stock Buybacks: From Retain-and-Reinvest to Downsize-and-Distribute," Center for Effective Public Management, Brookings Institution, April 2015 at http://www.brookings.edu/research/papers/2015/04/17-stock-buybacks-lazonick .

See Lazonick's footnoted paper for many loving particulars. Especially note the details of how Rule 10b-18 offers no protection from abuse and (no news to NC readers) is a pillar of general corporate asset-stripping .

Science Officer Smirnoff , May 12, 2017 at 12:43 pm

P. S. pages 10 and 11 of Lazonick's pdf lay out Rule 10b-18 in full.

David Barrera , May 12, 2017 at 12:59 pm

Thanks. Tremendous article!

Socal Rhino , May 12, 2017 at 12:59 pm

Engineering long-term career arc has been an issue since at least my father's generation (those born during WWI). Longer tenure (mid to late mid career) engineers were being eased out for young grads. When I was in a ChemE program in the 70s, advice was to follow the engineering degree with either law or a business degree because the odds of a long career doing engineering was not great. No one advised going for a PhD in engineering.

Arizona Slim , May 12, 2017 at 2:19 pm

My father had a PhD in chemical engineering.

When I asked him why he got the degree, which didn't seem necessary for someone who spent much of his career in industrial R&D, he said, "I'm like Mallory climbing Mount Everest. I got that degree because it is there."

So, there you have it. My old man getting that degree because he wanted to. And because my mother was willing to support both of them while he worked on it.

shinola , May 12, 2017 at 1:02 pm

To me, this is the money quote (literally):

"Many of America's largest corporations routinely distribute more than 100 percent of net income to shareholders, generating the extra cash by reducing cash reserves, selling off assets, taking on debt, or laying off employees the only logical explanation for this buyback activity is that the stock-based pay that represents the vast majority of the remuneration of senior corporate executives incentivizes them to manipulate their companies' stock prices "

This not only applies to the STEM sector, but nearly every large corp. in America. "Earnings quality" (i.e stock price) takes precedence over everything else leading to the crapification of products & services and devaluation of employees.

Thank gawd this type of thinking wasn't around when Jonas Salk was working on the polio vaccine.

nowhere , May 12, 2017 at 2:30 pm

Which begs the question: what discoveries are we missing out on now because of this short sighted approach?

Jim Haygood , May 12, 2017 at 1:27 pm

" In November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation. "

How can you have "looting" without lootees? The stockholders aren't complaining. If any party is being disadvantaged by borrowing to fund stock buybacks, it's existing bondholders. As David Swensen describes in an extended example in Pioneering Portfolio Management , managers compensated by stock options tend to treat corporate debt holders quite shabbily by piling on more debt, compromising the interest coverage ratio.

High tech companies use stock buybacks to offset their widespread granting of stock options which - absent Rule 10b-18 - would badly dilute existing stock holders over time.

Trying to paint the well-disclosed practice of stock buybacks as "looting" is histrionic ax grinding on Lazonick's part. Over-leveraged companies are going to regret it in the next recession. But that's a lamentable social phenomenon in a bubble-driven economy. Those who disagree with it are free to sell short over-leveraged stocks - perhaps a more meaningful way of expressing dissent than scribbling academic screeds.

Science Officer Smirnoff , May 12, 2017 at 1:41 pm

And political dissenters are free to emigrate.

fritter , May 12, 2017 at 2:22 pm

Well Jim, ponzi schemes work pretty well for those at the top. I suppose we shouldn't worry about it until we start getting complaints..

Actually though, watching the train wreck that is the outlook for the youngest generation today, provides some grim amusement. For instance noting that the "bubble-driven" economy composed of companies desperate to prevent their stock becoming "badly diluted" by having fire sales on capitol and expertise that probably took their predecessors decades to build can really only have one outcome. Depression, misery, socialism. Maybe we skip the Mao route this time, maybe not.

Alejandro , May 12, 2017 at 2:38 pm

Here's some related "histrionics" of your channeling D.D . an excerpt of a debate about "creative destruction" (emphasis mine) from 1991(context), chronologically, roughly following the tandem of Ronnie and Maggie.

Gregory Peck: "The Robber Barons of old at least left something tangible in their wake - a coal mine, a railroad, banks. THIS MAN LEAVES NOTHING. HE CREATES NOTHING. HE BUILDS NOTHING. HE RUNS NOTHING. And in his wake lies nothing but a blizzard of paper to cover the pain. Oh, if he said, "I know how to run your business better than you," that would be something worth talking about. But he's not saying that. He's saying, "I'm going to kill you because at this particular moment in time, you're worth more dead than alive." https://www.youtube.com/watch?v=xJRhrow3Jws

Danny Devito: "Let's have the intelligence, let's have the decency to sign the death certificate, collect the insurance, and invest in something with a future "Ah, but we can't," goes the prayer. "We can't because we have responsibility, a responsibility to our employees, to our community. What will happen to them?" I got two words for that: WHO CARES? Care about them? Why? They didn't care about you. They sucked you dry. You have no responsibility to them. For the last ten years this company bled your money. Did this community ever say, "We know times are tough. We'll lower taxes, reduce water and sewer."
https://www.youtube.com/watch?v=62kxPyNZF3Q

oho , May 12, 2017 at 1:29 pm

IBM. Poster child of everything wrong at the executive-level and the shareholder-level.

David Barrera , May 12, 2017 at 2:09 pm

Oho,

Yes, the IBM reference is interesting.The author gives an ordinal lead to IBM as a mover from the OEBM to NEBM. I ask myself if, from a mere one large corporation managing perspective, this was IBM's 11th hour response to the by then devastating rise of its competitors like Apple & Microsoft.

Also the irony that it did not help IBM at least in the midterm. So, IBM was the prime mover to initiate some aspects of a model change -change which every major player adhered to- in response to a new technological disadvantage vs. competitors, and in turned did not seem to do much for IBM in the immediate years. Although, if I recall well, IBM was immersed in many political battles and internal problems, legal and otherwise. Nevertheless, I doubt there was a historic inevitability on IBM's ordinal force. Outstanding work by Lazonick

Trout Creek , May 12, 2017 at 3:23 pm

Let me quote a noted tech analyst on IBM :

"IBM is the poster child for shenanigans. Last month, IBM reported its 20th quarter in a row of declining year over year revenues .. a 13% drop in earnings, profit margins that declined in every business segment ( much worse than expected ), free cash flow that plummeted over 50% year over year and an earnings "beat" of 3 cents per share. How could this "beat" happen? .. a negative tax rate of -23% . This is why they pay the CEO Rometti the big bucks ( estimated at $50 to $65 million last year)."

And this is one of the Bluest of the Blue Chip companies in the world.

Sue , May 12, 2017 at 6:12 pm

I read IBM spent a fortune at that time defending itself against monopolistic claims litigation. This was happening while Microsoft and Apple were clearly consolidating their oligopolistic empires. I read reports stating Oracle initial breakthroughs were taken from IBM's research work.

Thomas Williams , May 12, 2017 at 2:04 pm

Really fine piece, thanks. Also, the quality of the readers' comments is some of the highest I've seen in years of following NC

nowhere , May 12, 2017 at 2:35 pm

Not sure if anyone watches "Silicon Valley", but here is a quote that seems fitting:

Season 2 – Bad Money

Richard: Once we get a few customers and start a subscription-revenue model.

Russ: What? Revenue? No, no, no, no, no. No. If you show revenue, people will ask "How much?" And it will never be enough, but if you have no revenue, you can say you're pre-revenue. You're a potential pure play. It's not about how much you earn, it's about what you're worth. And who's worth the most? Companies that lose money. Pinterest, Snap chat No revenue. Amazon has lost money every fucking quarter for the last 20 fucking years, and that Bezos motherfucker is the king.

Wisdom Seeker , May 12, 2017 at 5:50 pm

Just wanted to point out that there is one more link in the chain to be followed: the financiers would not have such an easy time playing Nero with our economy, if the banking sector were still properly constrained by a gold standard (=limited supply of printed credit), the risk of bank runs by outraged consumers, the Glass-Steagall separation of commercial from investment banking, personal rather than corporate punishment for fraud and abuse, antitrust enforcement, etc.

In addition, the rise of 401(k) based investing, in which workers are tax-incentivized to buy in to the corporate stock scheming, but lack the normal shareholder voice in corporate governance, has taken the chains off the looters as well.

It's time to end the impunity. The government has been corrupted by the corporations, so only a populist uprising will produce reform. The uprising will require sacrifices of time, income, security. It will require boycotts of products that people like, but whose producers and vendors are evil. The products will not disappear while demand persists – but the producers and vendors must be brought to heel.

Consider the following inductees into the Corporate Hall of Shame:

pick an industry, you'll find a Hall of Shame candidate. Hit them all in the wallet until they reform.

Smitty , May 12, 2017 at 5:53 pm

The impact on the Grads was secondary a byproduct of a larger agenda which included the transfer offshore and consolidation of "IP" of the entire American, EU and Asian industrial economies along with the withdrawl of capital, while at the same time intentionally sabotaging future innovations with the handicap of diversity. Who got the loot and capital? Usual suspects.

[May 08, 2017] Warren Buffett Says Free Trade Has Turned American Workers Into Roadkill

May 08, 2017 | www.breitbart.com
"Nobody should be roadkill," Buffet said Saturday at the festival-like annual meeting of Berkshire Hathaway in Omaha, Nebraska.

The billionaire, who supported Barack Obama and backed Hillary Clinton in the 2016 election, now sounds almost Trump-ish. His comments on American workers echoed the remarks of President Donald Trump in his inaugural speech in January, which described a landscape of "American carnage" where closed factories are "scattered like tombstones."

Toward the end of the question and answer session with Buffett and his longtime sidekick Charlie Munger, investor Whitney Tilson asked if businesses should consider the fates of millions of Americans displaced by trade and technology instead of focussing solely on maximizing shareholder value. Buffett argued that free trade was a benefit to the economy at large but that politicians needed to "take care of the people who become roadkill."

This wasn't the first time Buffett has used the phrase. Back in February, he more-or-less gave this material a test run on CNBC's Squawkbox.

So free trade is wonderful for the world and for the United States, but its benefits are diffused among 320 million people. You buy your bananas cheaper because we don't try and produce them in the United States. But the penalties from free trade are terrible to specific industries. And as an investor, I can own – make a dumb decision on owning a shoe company. But if I own a good insurance company, I can diversify away the problems. If you're a 55-year-old steelworker, you can't diversify away your talents. I mean, you had it if steel or textiles or shoes become subject to total, it all moves offshore. So you want to have free trade, but you also have to take care of the people who, through no fault of their own, have spent their life learning one profession. And you can talk about retraining and all that, but it just isn't practical. And just take Berkshire Hathaway. We started with 2,000 employees in New Bedford, Mass, turning out textiles. And that business was doomed. And we had workers there who really they didn't have alternatives at age 50. Fair number of them just spoke Portuguese. They didn't have a chance. And a rich country that's prospering because of free trade, and as the world is prospering, should keep the free trade as much as possible. But they also should take care of the people that become the roadkill, you know, when an industry moves.

[May 07, 2017] Prime-Age Employment Rate Hits New High for Recovery

May 07, 2017 | economistsview.typepad.com
point , May 07, 2017 at 05:34 AM
Perhaps this report raises the possibility that this low pressure low growth economy may actually lead to a new high in the prime working age cohort, still with little wage growth.
libezkova -> point... , May 07, 2017 at 01:33 PM
Boomers are retiring and that increases employment in prime age (25-54) cohort. So to take only prime age is a little bit disingenuous. This effect needs to be taken into consideration.

Those who were born before 1950 were probably the most numerous. They all will be over 67 at the end of the year.

[May 07, 2017] Growing Inequality Under Global Capitalism naked capitalism

Notable quotes:
"... By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development and Anis Chowdhury, former Professor of Economics, University of Western Sydney, who held various senior United Nations positions in New York and Bangkok. Originally published at Inter Press Service ..."
"... Foreign Affairs ..."
May 07, 2017 | www.nakedcapitalism.com

Yves here. Even though much of the material in this post will be familiar to regular readers, some points are worth emphasizing. One defense regularly made of globalization is that even though it has lowered income of less-skilled workers in advanced economies (and even those of some skilled workers), laborers in emerging economies have gained. This picture is simplistic. As Joseph Stiglitz pointed out years ago, and the picture hasn't changed much, China has captured all of the income gains by emerging economies. Poverty in developing economies ex China hasn't budged. And the authors stress that inequality has exploded in China.

By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development and Anis Chowdhury, former Professor of Economics, University of Western Sydney, who held various senior United Nations positions in New York and Bangkok. Originally published at Inter Press Service

Income and wealth inequality has increased in recent decades, but recognition of the role of economic liberalization and globalization in exacerbating inequality has never been so widespread. The guardians of global capitalism are nervous, yet little has been done to check, let alone reverse the underlying forces.

Global Elite Alarmed by Growing Inequality

The World Economic Forum (WEF) has described severe income inequality as the biggest risk facing the world. WEF founder Klaus Schwab has observed, "We have too large a disparity in the world; we need more inclusiveness If we continue to have un-inclusive growth and we continue with the unemployment situation, particularly youth unemployment, our global society is not sustainable."

Christine Lagarde, IMF Managing Director, told political and business leaders at the WEF, "in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability." Similarly, World Bank President Jim Yong Kim has warned that failure to tackle inequality risked causing social unrest. "It's going to erupt to a great extent because of these inequalities."

In the same vein, the influential US Council of Foreign Relations' journal, Foreign Affairs , carried an article cautioning, "Inequality is indeed increasing almost everywhere in the post-industrial capitalist world . if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large."

Much Ado About Nothing?

Increasingly, the main benefits of economic growth are being captured by a tiny elite. Despite global economic stagnation for almost a decade, the number of billionaires in the world has increased to a record 2,199. The richest one per cent of the world's population now has as much wealth as the rest of the world combined. The world's eight richest people have as much wealth as the poorer half.

In India, the number of billionaires has increased at least tenfold in the past decade. India now has 111 billionaires, third in the world by country. The largest number of the world's abject poor also live in the same country - over 425 million, a third of the world's poor, and well over a third of the country's population.

Africa had a resource boom for a decade until 2014, but most people there still struggle daily for food, clean water and health care. Meanwhile, the number of people living in extreme poverty, according to the World Bank, has grown substantially to at least 330 million from 280 million in 1990!

In Europe, poor people bore the brunt of draconian austerity policies while bank bailouts mainly benefited the moneyed. 122.3 million people, or 24.4 per cent of the population in the EU-28, are at risk of poverty. Between 2009 and 2013, the number of Europeans without enough money to heat their homes or cope with unforeseen expenses, i.e., living with "severe material deprivation," rose by 7.5 million to 50 million people, while the continent is home to 342 billionaires!

In the United States, the income share of the top one per cent is at its highest level since the eve of the Great Depression, almost nine decades ago. The top 0.01 per cent, or 14,000 American families, own 22.2 per cent of its wealth, while the bottom 90 per cent, over 133 million families, own a meagre four per cent of the nation's wealth. The top five per cent of households increased their share of US wealth, especially after the 2008 financial crisis. Meanwhile, the richest one per cent tripled their share of US income within a generation.

This unprecedented wealth concentration and the corresponding deprivation of others have generated backlashes, arguably contributing to the victory of Donald Trump in the US presidential election, the Brexit referendum, the strength of Marine Le Pen in France, the Alternative for Germany, and the ascendance of the Hindutva right in secular India.

"Communist" China and Inequality

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many. Part of its huge trade surplus - due to relatively low, albeit recently rising wages - has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking "middle class" in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China's export-led development on the basis of low wages has sharply increased income inequality in the world's largest country for more than three decades. Beijing is the new "billionaire capital of the world," no longer New York. China now has 594 billionaires, 33 more than in the US!

Since the 1980s, income inequality in China has risen faster than most! China now has one of the world's highest levels of income inequality, rising mainly in the last three decades. The richest one per cent of households own a third of the country's wealth, while the poorest quarter own only one per cent. China's Gini coefficient for income rose to 0.49 in 2012 from 0.3 over three decades before when it was one of the most egalitarian countries in the world. Another survey put China's income Gini at 0.61 in 2010, greatly exceeding the US's 0.45!

12 0 24 5 0 This entry was posted in Africa , Banana republic , China , Economic fundamentals , Free markets and their discontents , Globalization , Guest Post , Income disparity , India on May 6, 2017 by Yves Smith .
Trade now with TradeStation – Highest rated for frequent traders
Subscribe to Post Comments 55 comments MoiAussie , May 6, 2017 at 4:16 am

Global Elite Alarmed by Growing Inequality is a rather misleading, or rather, abbreviated, subhead. On suspects it should be Global Elite Alarmed that Growing Inequality may not be Sustainable .

Is there any evidence anywhere that Global Elites would want voluntarily to reduce inequality?

cnchal , May 6, 2017 at 5:51 am

The reality is the global elite are alarmed that inequality isn't high enough, and fear having to give up a single dollar to the poors. There is no measuring stick big enough to measure the elite's greed.

Apple workers in China are so abused and underpaid, I am waiting for a factory rampage. When your sweat is stolen by Tim Cook colluding with the criminal leaders of China to steal all your effort for themselves, that would drive anyone nuts. Buying an Apple product means thousands of Chinese slaves are tortured.

Moneta , May 6, 2017 at 8:44 am

Proof: 1% in US keep on arguing how they only collect 20% of income but pay 40% of taxes.

They don't seem to realize that if their income had stayed at 30x the lowest paid instead of 300x, the lower paid would actually be paying more taxes.

Second, the rich typically have low incomes relative to assets so if taxes included assets, it would be interesting to see how that proportion would change.

Furthermore, why should someone get waterfront property just because of their birthright and have the audacity to tell the younger ones to pick themselves up by their bootstraps? If society does not fix the problem, Mother Nature will.

cnchal , May 6, 2017 at 9:35 am

Chinese labor get's shot if they were to try and organize a fight for better working conditions. The elite here and there conspire with each other to profit from it.

Here is proof:

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many . Part of its huge trade surplus - due to relatively low , albeit recently rising wages - has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking "middle class" in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China's export-led development on the basis of low wages has sharply increased income inequality in the world's largest country for more than three decades. Beijing is the new "billionaire capital of the world," no longer New York. China now has 594 billionaires, 33 more than in the US!

There are suicide prevention nets in the stairwells and around the building where Apple products are made. And they make really shitty money, compared to what they put out.

Apple has what, a fifth of a trillion stashed "offshore". Where did it come from? Right out of the sweat of those workers.

There is a fundamental difference between our politicians and Chinese politicians.

In our system, narcissists are elected and are then surrounded by psychopaths, in China it's a total brawl all the way to the top, so they skip the narcissist step.

sgt_doom , May 6, 2017 at 2:02 pm

Nicely stated!

dontknowitall , May 6, 2017 at 5:56 am

One way that inequality can be mitigated is by increasing government spending to create jobs and improve infrastructure but forecasts of the benefits can be manipulated to defeat such proposals by usually showing that less than a dollar of GDP growth is returned for each dollar of spending. Economists at North Carolina Sate U. have recently created an agnostic model stripped of partisan bias of how government spending benefits GDP and they show about $1.30 of GDP growth for each dollar spent. Let me quote (the original paper is paywalled):

" most widely used model for predicting how U.S. government spending affects gross domestic product (GDP) can be rigged using theoretical assumptions to control forecasts of how government spending will stimulate the economy Based on their observations, the researchers then developed an agnostic model, which was designed to avoid those tweaks that predispose the results to support a particular argument We found that the agnostic model predicts roughly $1.30 in near-term GDP growth for each $1 in spending."

https://phys.org/news/2017-05-impact-easily.html
https://www.aeaweb.org/articles?id=10.1257/aer.20111196&&from=f

sgt_doom , May 6, 2017 at 2:05 pm

I think most of us realize the details of how to decrease inequality - just as most of us thinking people realize that inequality increases unemployment which increases inequality - so your comment falls upon those who are tired with the oblivious who seem ignorant that the problem is not with the HOW, it is with that bloody revolution which has yet to come!

cripes , May 6, 2017 at 6:48 am

Yeah, I've always wondered what factors, besides sheer greed, elite inbreeding and stupidity, are responsible for the wide range of national GINI rankings.

According to the CIA anyway, among the most equal are affluent Germany (27.0) France (30.1) and Sweden (24.0), but also not-rich Albania (29.0) Romania (27.3) and, most equal, Slovenia at 23.7.

The European Union as a whole is rated GINA 30.1. The handful of non-European countries that crack the more equal list, strangely are, in ascending order Kazakstan (28.9) Pakistan (29.6) South Korea (30.2) and Australia (30.3).

Geographically, there is a swath of more-equal economies stretching from Western Europe to North Africa, South-west Asia (middle east) through India, Southeast Asia, Indonesia and Japan. This tends towards the idea that old-world, culturally cohesive societies have an interest in maintaining economies that promote inclusion and common interest. The Muslim barbarians and European socialists are less prone to exploiting their neighbors or throwing them overboard than we are, although Washington is working hard to remedy this situation.

Canada and Australia have wisely plotted a course closer to their European forbears than their American cousins.

Southern Africa, Latin America starting at the Rio Grande, China, Russia (bordering much more equal Kazakhstan?) and of course the USA are the heartlands of inequality. The common thread here, I presume, is their colonial heritage.

There may be something to the argument about homogeneous societies having a cultural advantage and all that, but England (32.4) and France, hardly exemplars of racial tranquility, or Australia, India and Canada seem to say otherwise.

The interesting thing seen easily on the map is that low income "developing" countries, with exceptions like Hong Kong (53.7) have a large preponderance of high GINI scores.

Middle-income China, Russia and Brazil, are joined by the always exceptional United States as continental empires with extreme inequality.

Readers thoughts?

Moneta , May 6, 2017 at 9:09 am

I'm not sure Canada can survive without socialism.

If we use current economic productivity and efficiency models, it would seem that North-South activity would make more sense than East-West. So from my perspective, if we want Canada to work, we have to share and accept higher costs and less material wealth to reach that goal.

The other issue we are facing capital from China let's say there are 10 million Chinese (we only have something like 12m households) who want to get their money out and a few million Canadians who want to get rich selling their house, you can imagine what kind of havoc the zirp/bailout/EZ money policies have unleashed on small attractive countries like Canada.

And our leaders are still denying the impact of foreign capital on our real estate market. Because these are the people who live in the overvalued urban areas and quite happy to see their home values soar.

IMO, protectionism will need to rear its ugly head.

Massinissa , May 6, 2017 at 7:04 pm

I'm not sure anyplace can survive without socialism if capitalism doesn't try and fix itself again like in the 30s. Which it might not, this time.

sgt_doom , May 6, 2017 at 2:08 pm

Remember, please, GINI scores do not accurately represent growing inequality within countries, they just supposedly represent inequality BETWEEN countries.

knowbuddhau , May 6, 2017 at 7:08 am

>>>"Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country."

Participated in what?

We're the bottom of the barrel. They're the cream on top. But the vessel is being overpressurized, accidentally on purpose. How much more can we take before the Great Blowout?

cripes , May 6, 2017 at 7:20 am

Oooops:

The common thread (to the US) with unequal China and Russia is not their "colonial heritage" but their empire-sized geography.

Also:

There is also the matter of GINI inequality within national borders, seen here: http://dev.null.org/scrapbook/2009/0420_us_gini.jpg

Surprisingly, but not to me, is that New York State holds the worst GINA rank at 49.9, a fact due not solely to the density of high income jerk-offs like Trump who claim residence there, but to the density of truly impoverished people that still remain in the five boroughs of NYC and the abandoned former industrial cities of upstate New York.

Although they report a very high 21% "poverty" rate, NYC's Commission on Equal Opportunity reports in 2012 that 40% of New York City families subsisted on less than $34,000 annually. Anyone familiar with the absurd official poverty thresholds, or the punishing cost of living in NYC for working people, well, do your own math.

Suffice it to say, national GINI rankings tell only part of the story.

There is a whole other realm of study in qualifying GINI effects by state, county, zip code or tract level.

UserFriendly , May 6, 2017 at 8:48 am

Bernie did best in the most egalitarian states interesting. Rich people vote more and if you are rich in an unequal state Bernie must sound like Satan.

MoiAussie , May 6, 2017 at 10:41 am

I guess you meant more rich people vote , but there're hidden truths in rich people vote more which are worth unpacking.

– In the US system, money talks. Rich people donate to support their future benefactors, which buys MSM speech and advertising that sways gullible votes to their side.

– Elected representatives are often in it to get rich, and are certainly bought and paid for. So rich people get the votes on the legislation that matters to them. The rest get representatives who simply don't deliver on the policies and promises that they ran on. Obama.

Susan the other , May 6, 2017 at 11:10 am

I was also thinking that broad data like the above hide the obvious solution. But I don't know how working from localities upward from towns to counties to cities to states would technically work to redistribute income. I know how they redistribute state tax money for the state's dept of education – they pool the money and distribute it per pupil evenly across all districts. The poorest districts getting the most help. So redistribution of income via taxes would have to come from the tax authority, i.e. the state. But that leaves local resources and solutions unused. As unused as they are disenfranchised from neoliberal globalization. It is just those very local communities that could be enlisted and employed to clean up the environment and do it sustainably. The state could subsidize cleanup. Organic farming. Artisans of all sorts. The fact that there is such inequality, and the fact that we are awash in garbage, pollution, and climate change seem to go hand in glove; and the mess is totally reversible. But start at the local level.

HopeLB , May 6, 2017 at 12:46 pm

Fresh water and arable land are becoming scarce and climate change will only exacerbate the trend. People could be put to useful, gratifying work using that suburban farmer's idea. Those large subsurban yards covered in meticulous lawns could be put to use feeding the world.

sgt_doom , May 6, 2017 at 2:15 pm

Thanks for your great remarks and comments - should be highly informative to many.

Also important to note - given the incredibly shrinking middle class in America (which might not always appear that way in the purposely faulty numerical data presented - or misrepresented) - that it is always worse than it appears since such data derives from the Census Bureau, which tracks ONLY wages, not income streams from capital gains (such as bonds and stocks, etc.). This (purposely) skews the size of the middle class much larger than it actually is - and it has been dramatically shrinking in America - as those rich and super-rich show up listed as in the middle class, economically.

Also, important to keep in mind that much supposed "data" comes from the National Bureau of Economics Research (NBER), which has as an emeritus , one Martin Feldstein from Harvard. Said Feldstein was a director at HCA when they were hit with the largest out-of-court penalty settlement for their Medicare/Medicaid fraud back in the 1990s. Said Feldstein was a director at Eli Lilly when they were hit with the then-largest criminal penalty for fraudulent marketing of their drugs. Said Feldstein was a director at AIG/Financial Products when they had to be bailed out by the US government for partaking in the largest insurance swindle in US history, so EVERYTHING coming out of the NBER should be considered suspect, given the character of its crew!

Anonymous2 , May 6, 2017 at 7:23 am

I wonder about Gini scores for the UK. A lot of residential central London is now owned by extremely rich people like Saudi princes and Russian oligarchs. My suspicion is that they are excluded from the figures. Their impact on the local economy by pricing just about everyone else out of this market is, however, non-trivial.

sgt_doom , May 6, 2017 at 2:18 pm

Yes, this site has carried some excellent articles in the past about this subject, GINI essentially tracks the supposed inequality among countries, not WITHIN the individual countries (or at least it fails to do so).

Something with is as appropriate to the UK as it is to America, a quote from an outstanding book, Glass House , by Brian Alexander:

"Corporate elites said they needed free-trade agreements, so they got them. Manufacturers said they needed tax breaks and public money incentives in order to keep their plants operating in the USA, so they got them. Banks and financiers needed looser regulations, so they got them. Employers said they needed weaker unions – or no unions at all – so they got them. Private equity firms said they needed carried interest and secrecy, so they got them. What did Lancaster and a hundred other town like it get? Job losses, slashed wages, poor civic leadership, social dysfunction, drugs."

Michael C. , May 6, 2017 at 8:12 am

To alter James Carville's noted quote, "It's capitalism, stupid." Or at least the way it is configured so that short term profit for the ownership class takes precedence over the immoral destruction of societies and mother earth.

Kalen , May 6, 2017 at 9:33 am

Rampant inequality, joblessness, homelessness is not a shameful aspect of unfortunate excesses of few or tragic side effect of modern mass capitalism but in fact it is its best feature, in fact absolutely necessary even critical to the success of this unbelievable confidence scheme callled capitalist socioeconomics enhanced by debt based monetary system and fiat currency.

And we all believe in that sham. We all believe in the value system and valuation of our commodified social life by somehow divine authority of few puny lowlifes in the ruling elite who are laughing at us all the way to the empty bank they own and we are indebted to.

As long as we believe that we work for money, a useless symbol of our total dependence, not for food, sustenance and shelter, as long as we believe we need money that cannot be eaten or utilized as a material for building shelter but can best be used as an emergency bathroom tissue substitute, we are lost begging for mercy enslaving ourselves to strangers for nothing but an illusion that breaths and promotes rampant inequality.

I know it sounds shocking but give it a thought if you can.

Here I found unique and controversial take on origins of money that touches upon similar theme of money itself as a propaganda tool of social control.

https://contrarianopinion.wordpress.com/2015/04/14/plutus-and-the-myth-of-money/

Moneta , May 6, 2017 at 9:52 am

Even if everyone worked their butt off or got multiple PhDs, we'd still need workers to clean radiation messes, toilet bowls or change diapers.

All our system is doing today is making everyone compete ever harder for crappy jobs.

Do we really need the education we are getting for most of the jobs out there?

justanotherprogressive , May 6, 2017 at 10:36 am

"Even if everyone worked their butt off or got multiple PhDs, we'd still need workers to clean radiation messes, toilet bowls or change diapers."

Is there some law that says that PhD's can't clean radiation messes, toilet bowls or change diapers? Shouldn't everyone be responsible for "survival work"? Why should it just be some class of "workers" that need to do those jobs? Why are some people considered so much better than others that they are exempt from "survival work"? What if everyone put some of their work time every day doing this "survival work" before they did their "careers"?

Unfortunately, this is just another example of how the neoliberal ideology has infiltrated everyone's thinking, even those who are diametrically opposed to neoliberalism on some level and why it is going to be so hard to get rid of ..

Moneta , May 6, 2017 at 11:07 am

Typically those who go to university to get PhDs do not dream of changing diapers and wiping butts.

Two big issues here are expectations management and misallocation of resources.

Unhappy individuals and misallocation of resources contribute to reduce quality of life and wealth.

Moneta , May 6, 2017 at 11:18 am

If we want PhDs to like wiping butts, we need to dissociate education from the workforce. IOW, education should be for the love of knowledge.

But why would we want those with special skills changing diapers if they could contribute in areas that improve our quality of life?

p.s. I have trouble with progressivism when it is used to level from the bottom

John Wright , May 6, 2017 at 11:17 am

My late father, who looked for employment during the Great Depression, would say "You needed a college degree to pump gas for Standard Oil".

He had a cynical view of college degrees, asserting that if degrees were necessary for jobs, the future employers should help with the training expense.

The "must get an expensive college degree" assertion is losing its effectiveness on the stressed American population, where we approach nominal full employment at poor wages.

I suspect the education that is most needed in the USA is critical thinking that serves to question the wisdom of our government and the MSM in the propaganda they promote..

Moneta , May 6, 2017 at 11:20 am

I tend to agree. If corporate America shouldered the cost of education, my intuition tells me that workers would not need as many degrees.

John Wright , May 6, 2017 at 11:44 am

My dad did have a college degree, but his experience in his father's store helped him get a job as a butcher for Safeway during the Great Depression.

As I remember the story, many were vying for the Safeway butcher job, but he outlined how his prior experience would "help them sell more meat".

All one has to do is look at the projections from the labor department for STEM job growth over the next 10 years (about 100K/year) and compare that to the similarly sized H1-B visa count that tech firms want per year to see that a STEM college education is not the safe haven in the job market that the MSM promotes.

International companies cast a world wide net for educated talent, and are probably unconcerned how much a prospective employee's degree cost to acquire.

And these corporations also want to lower their US taxes, which indirectly cuts public education funding.

Moneta , May 6, 2017 at 11:52 am

A large percentage of well paying jobs are sales related. We don't need PhD knowledge to perform in those. These require people skills and a network.

Paul Greenwood , May 6, 2017 at 3:04 pm

We don't actually need PhD outside physical sciences. It is a qualification ONLY in the Thesis subject matter. We also don't need so many Lawyers and should turn of the production line (maybe that is what inflates GDP in UK and US .lawyers billing rates ?)

Moneta , May 6, 2017 at 11:34 am

It also brings to mind all those who don't want to pay for school taxes because they don't have children.

I'm quick to remark that on the same principle, in such a system they should not accept government services from anyone younger than them.

sgt_doom , May 6, 2017 at 2:27 pm

Excellent point, but that is the purpose of Identity Politics, to erase the concept of "the worker" from our minds and thoughts, practiced by both the r-cons of the bankster party and the faux crats of the bankster party.

The r-cons' identity politics is that the "media" (still haven't found them in Amerika) are "liberal" (still have found that, either) and the r-cons are besieged by these outfits.

The faux crats wish to focus on every possible sub-grouping of humans, to the exclusion of wage earners.

Worked for decades, but I suspect it may possibly and finally be beginning to fall apart . . .

justanotherprogressive , May 6, 2017 at 10:46 am

"Do we really need the education we are getting for most of the jobs out there?"

The future belongs to those capable of handling it – the others will be cast to the wayside. Do you really want to condemn most people to being part of the wayside? Why do you think education is becoming so expensive?

No, we ALL need more education, not less.

MoiAussie , May 6, 2017 at 11:04 am

We do indeed all need more education, but not of the type that most people think. The education young people suffer through for years and then go into debt for more of is designed largely to impoverish, enslave, and brainwash. It's anti-education, creating false expectations, instilling poisonous memes, punishing independence and non-compliance.

There are exceptions of course. Education for the rich is designed to teach the rules of the game, weed out the unreliable, and establish lifetime networks.

justanotherprogressive , May 6, 2017 at 11:14 am

Absolutely true. Our current education system only creates workers – it doesn't create thinkers .

Moneta , May 6, 2017 at 11:25 am

Thank you. That is what I wanted to convey.

Norb , May 6, 2017 at 12:31 pm

I am reminded that people with curious minds are always educating themselves – formal setting or not- wealthy or not. The social system should provides an outlet for those talents and effort. The failing of todays ruling ideology is that human talent is undervalued and underutilized. In effect, built on waste and inefficiency in a broader sense. Todays economic system seems most efficient on creating inequality.

A 4 hour work day based on a livable wage could open many "educational" doors.

Norb , May 6, 2017 at 12:36 pm

I am also old enough to remember that vocational training was taken seriously in public schools without social stigma. Labor was not a dirty word. A different form of critical thinking focused on manufacture.

Another Anon , May 6, 2017 at 12:16 pm

MoiAussie,

Are you referring to the "practical" one and two year programs like the Australian TAFE system ? I got a two year computer degree from such a program almost twenty
years ago and was fairly impressed with the program. Of the twenty
people in my class, eighteen had at least a masters degree in some technical
subject though the program was designed for those who did not seek to
go to university. The ones with the advanced degrees such as myself were unemployed and so retraining.

MoiAussie , May 6, 2017 at 12:35 pm

Not at all. Practical training like TAFE (or like TAFE used to be) can be valuable, depending on what course you choose. I'm referring to primary, secondary and university education as it is offered to the mainstream today in the western world.

Primary and secondary education is degraded for reasons far too complex to get into here. Of course there are still tertiary courses and teachers that educate, but universities are now run strictly as commercial enterprises, and such teachers find it harder and harder to prosper.

Paul Greenwood , May 6, 2017 at 3:02 pm

Before John Major UK had quality courses such as City & Guilds and Part-Time University Courses – "Sandwich Courses" where working students had Block or Day Release to study and could work through their studies with access to industrial labs and equipment and university facilities. It was very cost-effective. Major turned everyone into Full-Time Students so they emerged after 3 years with no relevant industrial experience and lots of debt

Norb , May 6, 2017 at 12:05 pm

The answer to your question is No. The resistance to single payer health care in America belies that fact. Many alternative lifestyles would be possible if one could relieve exorbitant medical care from household expenses. Private businesses would be indirectly forced to offer more humane working conditions, regardless of what that work entailed by the mere fact that labor could easily relocate to a less exploiting employer. Added to that, the removal of stress accompanied by needing to deal with medical uncertainties of life. A sane society would provide care for all its members.

Guaranteed food, shelter, basic education, healthcare, and some form of work are all that is required from a just society. That should be the criteria for evaluating the system. This is not utopia, and is within reach. There is nothing technical holding this realization back. The elite create conflict to secure their position. They believe in inequality.

When you look at it, most "jobs" in capitalist society don't satisfy any legitimate human need for survival. Not to mention the needs of the remaining life on the planet. Most are satisfying manufactured wants. A cynical play on human emotion that condemns most to unhappy and stressful lives.

Change will happen when a critical mass of people can get past the fear and psychological damage that is caused by manufactured needs, excessive higher education for all being one them. In and of itself, a "higher education" is meaningless if you cannot practice the acquired skill. Are lower work hours on the horizon to accommodate all the excess degrees? Not in the least.

This is not to say that lifelong education should not be an aspirational goal. Only to stress that the social organizing structure must accommodate that goal in a meaningful way. Right now, in America, it is mostly overt exploitation. A creative way to manufacture debt slaves.

Moneta , May 6, 2017 at 12:19 pm

Once upon a time, most of the highly educated took a vow of poverty with the assurance they would be cared for in a time of need.

Today most jump on the degree bandwagon to get on the road to material consumption and end up realizing they were sold an expensive if not worthless bill of goods.

Paul Greenwood , May 6, 2017 at 2:16 pm

Before BANKS became the motor of Western Capitalism it was different. Banks were a Service Business now the rest of society SERVES the Banks

jrs , May 6, 2017 at 12:23 pm

well said

MoiAussie , May 6, 2017 at 12:56 pm

Regarding excessive higher education as a manufactured need, I think there are at least two other factors at play besides credentialism and the (futile?) pursuit of good careers.

One is the decline in the literacy, numeracy, general knowledge, and other educational achievements of your average high school graduate compared to 30 years ago. It's well recognised in universities that much of what used to be taken as known by freshpersons, today needs to be taught or retaught in the early years of a university/college course.

The second factor is simply the growing complexity and pace of change of the world we inhabit. I suspect this is a major reason behind the increase in the number of years of fulltime education the average person seems to think they require.

Paul Greenwood , May 6, 2017 at 2:18 pm

What is the US Healthcare problem ? It is a Ricardian Issue of who is taking Supernormal Profit and what the correct level of Economic Rent might be.

Maybe it is Insurance that is the problem. People buy Insurance not Health and Insurance responds only to Litigation

justanotherprogressive , May 6, 2017 at 11:13 am

+ 100
I think that people are so driven to value themselves in terms of money, that they won't even allow other ideas like this to enter their consciousness
Sadly, now is the time when we need to be thinking about other ideas, because the ones we currently accept as valid just aren't working for most of the world's people ..

Kalen , May 6, 2017 at 4:01 pm

Thank you. You seem to be the only one who got my most important point namely a subversive function of money as a propaganda of liberalism that underlie socioeconomic system of capitalism and commodification (valuation and valorization in terms of money) of environment and social relations.

What I mean by "propaganda of liberalism" is hijacking of ideas of individual Freedom to mean abandonment of common interests and separation from community, also separation from community in a form of alienation of private property from community commons and hence introduction of money as a representation of the private property, capital or collateral in a debt based monetary system.

The money is so much embedded into people's psyche that trying to explain artificiality of such an arrangement amounts to a sort of Copernican revolution of explaining reality that completely contradicts everyday common sense experience.

What's insidious in capitalism is that social relations among masses of people are forced to be negotiated by money in addition to old ways of social relations (also labor relations) being negotiated by social position and political power and/or what we call culture i.e a common set of attitudes and practices that have been empirically/historically proven beneficial for community.

People do not realize that even 200 years ago many people were living who did not use money even once in their lives since they did not need to, they produced their own food, cloths, tools, they barter other goods and even taxes they paid via field labor.

Imagine us today paying all our bills directly with our labor, one thing we have abundant and we control, not scarce money controlled solely by greedy elite.

Unemployment would be something our children would have learned about only from history pages.

B.J.M. , May 6, 2017 at 10:32 am

I guess nobody every read False Dawn: The Delusions of Global Capitalism, by John Gray then a professor at the London School of Economics. It was published in 1998 and is to this day the greatest critique of neoliberal economic dogma ever written. Then again Gray is an intellectual's intellectual so the media has always ignored him in favor of pop intellectual simpletons like Tom Friedman.

It is as if Gray had a time machine which allowed him to see the future.

Paul Greenwood , May 6, 2017 at 2:59 pm

Prior to 1914 Global Capitalism had powered ahead hindered only by US Tariff Walls such as McKinley Tariff and the upsurge in Tariffs in Germany, Russia, France and a ludicrous British commitment to Free Trade which destroyed investment in industry as capital flowed overseas. The result was 1914-18 War and the removal of Russia (the fastest-growing market) from European trade and destruction of Germany and Central Europe

Bob , May 6, 2017 at 2:04 pm

Social unrest and a populous backlash against global capitalism are always trotted out as the main effects gross economic inequalities will have. But given the elites control of the media and our economy they have the tools and power to limit unrest and any backlash. The more important effect of economic inequality is that it will destroy capitalism itself.

Paul Greenwood , May 6, 2017 at 2:14 pm

Global Elite Alarmed by Growing Inequality

That is reassuring, I would hate to think "the Global Elite" was out of touch or playing shepherdess in Hameau de la Reine; it is good to know the Controllers have their finger on the pulse and are "caring" for us.

Cynicism is well-fed in the current era.

Years ago I read Amy Chua's book "World On Fire" (2002)

and Sir James Goldsmith: "The Trap"

You can read it FREE at

Scott , May 6, 2017 at 5:08 pm

None of the workers give a shit about how rich the rich are. All they want is a living wage. That the rich, who Piketty points out are rich because they inherited wealth to start with won't pay, is insane on the part of the rich.

[May 05, 2017] My spouse teaches in an inner city school and its pretty much only the immigrant kids who have intact families providing them with support at home

May 05, 2017 | www.nakedcapitalism.com
DH , May 4, 2017 at 12:04 pm

I have always wondered how successful the big producers, such as Wall Street traders, would be if they were subjected to random stop-and-frisk of them in their cars and coming out of the bars at night like they would be regularly subjected to if they lived in poor neighborhoods. It is likely that a lot of DWI and drug charges would be filed, similar to what we see in the inner city, with attending legal issues impacting their productivity. Assuming they then faced the court system with court-provided counsel instead of highly-paid Harvard Law grads, I wonder how many of them would be back at work the next day?

My spouse teaches in an inner city school and its pretty much only the immigrant kids who have intact families providing them with support at home – most of the American (black, white, and hispanic) kids in her classes have parents in jail, domestic abuse protective orders, etc. They are frequently raised by their grandparents or other relatives. Playing outside at recess and lunch at school is very important because many of the kids live in neighborhoods where it is unsafe to play outside. Being poor is very effective at teaching kids how to be poor.

RabidGandhi , May 4, 2017 at 1:38 pm

Wonder no more: Chappelle spells it out .

[May 01, 2017] Trump: A Resisters Guide by Wesley Yang

Recommended !
Jan 21, 2017 | harpers.org
[Neo]liberalism that needs monsters to destroy can never politically engage with its enemies. It can never understand those enemies as political actors, making calculations, taking advantage of opportunities, and responding to constraints. It can never see in those enemies anything other than a black hole of motivation, a cesspool where reason goes to die.

Hence the refusal of empathy for Trump's supporters. Insofar as it marks a demand that we not abandon antiracist principle and practice for the sake of winning over a mythicized white working class, the refusal is unimpeachable. But like the know-nothing disavowal of knowledge after 9/11, when explanations of terrorism were construed as exonerations of terrorism, the refusal of empathy since 11/9 is a will to ignorance. Far simpler to imagine Trump voters as possessed by a kind of demonic intelligence, or anti-intelligence, transcending all the rules of the established order. Rather than treat Trump as the outgrowth of normal politics and traditional institutions - it is the Electoral College, after all, not some beating heart of darkness, that sent Trump to the White House - there is a disabling insistence that he and his forces are like no political formation we've seen. By encouraging us to see only novelty in his monstrosity, analyses of this kind may prove as crippling as the neocons' assessment of Saddam's regime. That, too, was held to be like no tyranny we'd seen, a despotism where the ordinary rules of politics didn't apply and knowledge of the subject was therefore useless.

Such a [neo]liberalism becomes dependent on the very thing it opposes, with a tepid mix of neoliberal markets and multicultural morals getting much-needed spice from a terrifying right. Hillary Clinton ran hard on the threat of Trump, as if his presence were enough to authorize her presidency.

Where Sanders promised to change the conversation, to make the battlefield a contest between a multicultural neoliberalism and a multiracial social democracy, Clinton sought to keep the battlefield as it has been for the past quarter-century. In this single respect, she can claim a substantial victory. It's no accident that one of the most spectacular confrontations since the election pitted the actors of Hamilton against the tweets of Trump. These fixed, frozen positions - high on rhetoric, low on action - offer an almost perfect tableau of our ongoing gridlock of recrimination.

Clinton waged this campaign on the belief that her neoliberalism of fear could defeat the ethnonationalism of the right. Let us not make the same mistake twice. Let us not be addicted to "the drug of danger," as Athena says in the Oresteia, to "the dream of the enemy that has to be crushed, like a herb, before [we] can smell freedom."

The term "meritocracy" became shorthand for a desirable societal ideal soon after it was coined by the British socialist Sir Michael Young. But Young had originally used it to describe a dystopian future. His 1958 satirical novel, The Rise of the Meritocracy, imagines the creation and growth of a national system of intelligence testing, which identifies talented young people from every stratum of society in order to install them in special schools, where they are groomed to make the best use possible of their innate advantages.

In the novel, what begins as a struggle against inherited privilege results in the consolidation of a new ruling class that derives its legitimacy from superior merit. This class becomes, within a few generations, a hereditary aristocracy in its own right. Sequestered within elite institutions, people of high intelligence marry among themselves, passing along their high social position and superior genes to their progeny. Terminal inequality is the result. The gradual shift from inheritance to merit, Young writes, made "nonsense of all their loose talk of the equality of man":

Men, after all, are notable not for the equality, but for the inequality, of their endowment. Once all the geniuses are amongst the elite, and all the morons are amongst the workers, what meaning can equality have? What ideal can be upheld except the principle of equal status for equal intelligence? What is the purpose of abolishing inequalities in nurture except to reveal and make more pronounced the inescapable inequalities of Nature?

I thought about this book often in the years before the crack-up of November 2016. In early 2015, the Harvard sociologist Robert Putnam published a book that seemed to tell as history the same story that Young had written as prophecy. Our Kids: The American Dream in Crisis opens with an evocation of the small town of Port Clinton, Ohio, where Putnam grew up in the 1950s - a "passable embodiment of the American Dream, a place that offered decent opportunity for all the kids in town, whatever their background." Port Clinton was, as Putnam is quick to concede, a nearly all-white town in a pre-feminist and pre-civil-rights America, and it was marked by the unequal distribution of power that spurred those movements into being. Yet it was also a place of high employment, strong unions, widespread homeownership, relative class equality, and generally intact two-parent families. Everyone knew one another by their first names and almost everyone was headed toward a better future; nearly three quarters of all the classmates Putnam surveyed fifty years later had surpassed their parents in both educational attainment and wealth.

When he revisited it in 2013, the town had become a kind of American nightmare. In the 1970s, the industrial base entered a terminal decline, and the town's economy declined with it. Downtown shops closed. Crime, delinquency, and drug use skyrocketed. In 1993, the factory that had offered high-wage blue-collar employment finally shuttered for good. By 2010, the rate of births to unwed mothers had risen to 40 percent. Two years later, the average worker in the county "was paid roughly 16 percent less in inflation-adjusted dollars than his or her grandfather in the early 1970s."

Young's novel ends with an editorial note informing readers that the fictional author of the text had been killed in a riot that was part of a violent populist insurrection against the meritocracy, an insurrection that the author had been insisting would pose no lasting threat to the social order. Losing every young person of promise to the meritocracy had deprived the working class of its prospective leaders, rendering it unable to coordinate a movement to manifest its political will. "Without intelligence in their heads," he wrote, "the lower classes are never more menacing than a rabble."

We are in the midst of a global insurrection against ruling elites. In the wake of the most destructive of the blows recently delivered, a furious debate arose over whether those who supported Donald Trump deserve empathy or scorn. The answer, of course, is that they deserve scorn for resorting to so depraved and false a solution to their predicament - and empathy for the predicament itself. (And not just because advances in technology are likely to make their predicament far more widely shared.) What is owed to them is not the lachrymose pity reserved for victims (though they have suffered greatly) but rather a practical appreciation of how their antagonism to the policies that determined the course of this campaign - mass immigration and free trade - was a fully political antagonism that was disregarded for decades, to our collective detriment.

A policy of benign neglect of immigration laws invites into our country a casualized workforce without any leverage, one that competes with the native-born and destroys whatever leverage the latter have to negotiate better terms for themselves. The policy is a subsidy to American agribusiness, meatpacking plants, restaurants, bars, and construction companies, and to American families who would not otherwise be able to afford the outsourcing of childcare and domestic labor that the postfeminist, dual-income family requires. At the same time, a policy of free trade pits native-born workers against foreign ones content to earn pennies on the dollar of their American counterparts.

In lieu of the social-democratic provision of childcare and other services of domestic support, we have built a privatized, ad hoc system of subsidies based on loose border enforcement - in effect, the nation cutting a deal with itself at the expense of the life chances of its native-born working class. In lieu of an industrial policy that would preserve intact the economic foundation of their lives, we rapidly dismantled our industrial base in pursuit of maximal aggregate economic growth, with no concern for the uneven distribution of the harms and the benefits. Some were enriched hugely by these policies: the college-educated bankers, accountants, consultants, technologists, lawyers, economists, and corporate executives who built a supply chain that reached to the countries where we shipped the jobs. Eventually, of course, many of these workers learned that both political parties regarded them as fungible factors of production, readily discarded in favor of a machine or a migrant willing to bunk eight to a room.

Four decades of neoliberal globalization have cleaved our country into two hostile classes, and the line cuts across the race divide. On one side, college students credential themselves for meritocratic success. On the other, the white working class increasingly comes to resemble the black underclass in indices of social disorganization. On one side of the divide, much energy is expended on the eradication of subtler inequalities; on the other side, an equality of immiseration increasingly obtains.

Even before the ruling elite sent the proletariat off to fight a misbegotten war, even before it wrecked the world economy through heedless lending, even before its politicians rescued those responsible for the crisis while allowing working-class victims of all colors to sink, the working class knew that it had been sacrificed to the interests of those sitting atop the meritocratic ladder. The hostility was never just about differing patterns in taste and consumption. It was also about one class prospering off the suffering of another. We learned this year that political interests that go neglected for decades invariably summon up demagogues who exploit them for their own gain. The demagogues will go on to betray their supporters and do enormous harm to others.

If we are to arrest the global descent into barbarism, we will have to understand the political antagonism at the heart of the meritocratic project and seek a new kind of politics. If we choose to neglect the valid interests of the working class, Trump will prove in retrospect to have been a pale harbinger of even darker nightmares to come.

[May 01, 2017] Process versus outcomes: Inequality indices as tests of fairness

Notable quotes:
"... "Another kind of inequality arising through the operation of the market is also required, in a somewhat more subtle sense, to produce equality of treatment. It can be illustrated most simply by a lottery. Consider a group of individuals who initially have equal endowments and who agree voluntarily to enter a lottery with very unequal prizes. The resultant inequality is surely required to permit the individuals in question to make most of their initial equality. Much of the inequality of income produced by payment in accordance with product reflects equalizing differences or the satisfaction of men's taste for uncertainty." ..."
"... Journal of Economic Theory ..."
"... Measuring Inequality. ..."
"... Capitalism and Freedom ..."
"... Philosophy & Public Affairs ..."
"... Equality of Opportunity, ..."
"... Handbook of Income Distribution, volume 2 ..."
May 01, 2017 | voxeu.org
The standard procedure for measuring income inequality in a society is to take the observed distribution of income and to calculate an inequality index from it. Such indices have also been interpreted as a measure of welfare loss entailed in departures from equality of outcomes for a society which is egalitarian. A classic treatment is that of the late Tony Atkinson, who asked the question: What fraction of national income would an egalitarian society be willing to give up in order to have equality? On this basis, he developed what we now call the Atkinson Index of Inequality. 1

However, this procedure faces the well-known criticism that the observed distribution is nothing but the outcome of a process, and that it is the process which matters for normative assessment. 2 In particular, it is the fairness of the underlying process which is held to be the appropriate normative standard, not whether the observed inequality of outcomes is high or low. But if we take the process versus outcomes criticism seriously, does this mean that we stop calculating inequality, since it no longer has normative validity in and of itself? The answer to this question is no. In our recent work, we argue that even within the process frame, overall indices of inequality still maintain their relevance, but now as statistical tests of fairness (Kanbur and Snell 2017).

An early proponent of the process versus outcome line of argument was Milton Friedman (1962), who brought in the consequences of risk taking for interpreting observed inequality:

"Another kind of inequality arising through the operation of the market is also required, in a somewhat more subtle sense, to produce equality of treatment. It can be illustrated most simply by a lottery. Consider a group of individuals who initially have equal endowments and who agree voluntarily to enter a lottery with very unequal prizes. The resultant inequality is surely required to permit the individuals in question to make most of their initial equality. Much of the inequality of income produced by payment in accordance with product reflects equalizing differences or the satisfaction of men's taste for uncertainty."

Friedman's argument highlights simultaneously the issue of process versus outcomes, and the fact that even when the process implies ex ante equality (free lottery choice by identical individuals), the outcome may well show – misleadingly, in his view – inequality among individuals. Even though the process itself is fair, inherent randomness may show spurious inequality in outcomes.

Suppose we wish to evaluate the process in Friedman's example. This would require an evaluation of whether the lotteries faced by the different individuals were indeed identical. If we could directly observe the lottery choices, that would be the end of the matter. But this is usually not the case. All we can observe are in fact the outcomes. The task is then to try and infer from these outcomes the nature of the process which generated them. It is clear that in order to do this we will have to provide a minimal structure to the class of processes. It is only within a given class of processes that we will be able to infer more specific properties of the process that gave rise to the outcomes we observe. In our work, we show that making these assumptions can provide considerable insight into the relationship between outcomes and process.

In particular, we motivate the use of two well-known and commonly used indices of inequality – the Theil Index and the Mean Log Deviation (MLD) – as tests of the null hypothesis of fairness versus the alternative of unfairness. 3 We show that the likelihood ratio tests for fairness within two distinct income processes are proportional to these two well used indices respectively – that is to say, the tests are metrics of whether or not each individual faces the same income process. We then suggest that instead of presenting the indices as raw numbers, one could present the p-values that the raw numbers imply – a high Theil/MLD would imply a low p-value, which in turn would indicate that the probability that incomes were generated by a fair process was low.

We call the first stylised process we consider the 'helicopter money drop'. Think of a helicopter dropping a fixed total amount of dollars onto a population. Each individual has a probability that he or she catches a dollar thrown from the helicopter. Fairness in this process is when all probabilities are equal. The likelihood ratio test for fairness in this frame is proportional to the Theil Index. We call the second stylised process the 'helicopter money stop'. Suppose that within any year, each of our individuals receives the same amount of income each 'hour' and will continue to receive this hourly amount subject to a 'stop' which is dropped by the helicopter. Fairness is now characterised by the probability of 'stopping' being the same each hour for each individual regardless of how many hours they have survived the hazard. For this process, the likelihood ratio test for fairness is proportional to MLD.

The classical hypothesis testing approach takes fairness as a sharp null and asks whether the data support it. In a Bayesian framework, fairness and unfairness are 'models' and we ask which is more likely given the observed data. We show that if fairness and unfairness are treated as equally likely, then the two indices are also proportional to a measure of how the data modifies initial agnosticism in the direction of favouring fairness or unfairness as being the more likely model generating the observations.

Returning to Friedman's example, it is obvious that in reality endowments are not equal and individuals face different lotteries. The final outcomes are thus the result of these inequalities across lotteries, as well as the inequality caused by the fact that even when a group of individuals faces the same lottery, and so are equal ex ante, there will be winners and losers ex post within that group. That portion of observed inequality which can be attributed to the initial ex ante differences across lotteries that individuals have access to, might be referred to as 'inequality of opportunity'. This is related to John Roemer's (1998) famous formulation of attributing variation in outcomes to variation in 'circumstances' (factors outside an individual's control) and 'effort' (factors within an individual's control).

We are then led to ask whether we can test for whether there are these ex ante differences ('unfairness') across groups defined by common circumstances (for example based on ethnicity and gender). We show that for the two processes, we can indeed use the Theil index and MLD to develop statistical tests for fairness across groups. Applying the methods to US data for groupings based on race, gender, health, location of birth state (North or South), and biological parents, we find that fairness is rejected. Similarly, in a Bayesian framework we find that starting with priors of fairness and unfairness being equally likely, the data move us in the direction of unfairness being more likely.

Thus, the answer to the process based critique of inequality measurement is not to stop calculating inequality indices. Rather, it is to interpret inequality indices differently, as test statistics to shed light on the fairness of the process.

References

Atkinson, A (1970), "On the Measurement of Inequality." Journal of Economic Theory 2: 244-263.

Cowell, F A (2011), Measuring Inequality. Oxford University Press, Oxford.

Friedman, M (1962) Capitalism and Freedom . University of Chicago Press.

Dworkin, R (1981), "What is Equality? Part 2: Equality of Resources." Philosophy & Public Affairs , 10(4), pages 283-345.

Kanbur, R and A Snell (2017), " Inequality Indices as Tests of Fairness ." CEPR Discussion Paper No. 11930.

Roemer, J (1998), Equality of Opportunity, Harvard University Press.

Roemer, J E and A Trannoy (2015), "Equality of Opportunity", in A B Atkinson and F Bourguignon (eds), Handbook of Income Distribution, volume 2 , pp. 217-300, Elsevier.

Endnotes

[1] See Atkinson (1970). For an overview and survey of standard methods, see Cowell (2011).

[2] Early critiques are by Sen (1979) and Dworkin (1981). A recent survey is by Roemer and Trannoy (2015).

[3] Note that MLD as sometimes also known as "Theil's second index".

[Apr 27, 2017] Rising income inequality and the death of the American dream

Apr 27, 2017 | www.nakedcapitalism.com
Tehanu , April 27, 2017 at 3:45 pm

Pleasantly surprised to see this research article on the need to combat rising income inequality and the death of the American dream in the AAAS journal Science:
http://science.sciencemag.org/content/356/6336/398

neo-realist , April 27, 2017 at 3:49 pm

Re: Boeing, It is cutting jobs in the Seattle area and not cutting any in right to work w/ little pay and benefits SC

They're also engaging in stock buybacks to enrich the present stockholders.

http://www.thestranger.com/slog/2017/04/26/25102415/seattle-times-providing-pr-for-boeings-greedy-execs

Huey Long , April 27, 2017 at 5:06 pm

Does management serve any purpose these days besides screwing workers for the benefit of squillionaire bankers and c-suite executives?

Oh, right I forgot!

They use all that MBA knowledge to game the finance system and tax laws for the benefit of squillionaire bankers and c-suite executives too.

/snark

grayslady , April 27, 2017 at 3:51 pm

I don't know why everyone is calling the Raise the Wage Act "Bernie Sanders' Minimum Wage Act," since the bill was introduced by Patty Murray. Further, the Act doesn't have anyone receiving $15 until 2024. If you live in Seattle and work for a large employer (over 500 employees), you will receive $15 per hour minimum either in 2017 or 2018, depending on whether or not the company provides health insurance as a benefit. People are hurting now . They need $15 per hour now . Once again, the Dems are "fighting" but not trying to win.

JustAnObserver , April 27, 2017 at 4:11 pm

Seems that Boeing in are trying to get under that 500 employees in Seattle hurdle in the next 2 years.

Lambert Strether Post author , April 27, 2017 at 4:31 pm

He introduced the bill:

With four times as many Democratic co-sponsors as he had just two years ago, Sen. Bernie Sanders (I-Vt.) on Wednesday morning re-introduced a bill to raise the federal minimum wage to $15 per hour.

In 2015, Sanders introduced similar legislation with just five co-sponsors. On Wednesday, he boasted 21, in addition to lead co-sponsor Sen. Patty Murray (D-Wash.). They are:

grayslady , April 27, 2017 at 8:03 pm

Actually, Patty Murray introduced the bill on April 30, 2015, which would have raised the minimum wage gradually to $12 by 2020. There were 32 original co-sponsors, all Dems. Bernie introduced a similar bill on July 22, 2015, with Ed Markey as the original co-sponsor, which would have raised the minimum wage to $15 dollars by 2020. Members of the Congressional Progressive Caucus introduced a companion bill in the House. The most recent bill is a re-introduction of Murray's bill, with Sanders now supporting $15 by 2024.

I know that many here continue to wish to believe that Sanders hasn't sold out to the Dems, but the evidence becomes clearer that he is no longer the fighter he was when he ran for President.

John k , April 27, 2017 at 8:58 pm

I hope you're wrong. But the wind did go out of his sails when he lost NY, before that he was still hoping.
I continue to see him as fighting for us, but the dems keep kicking him
the only way to kick back is third party, but a monumental effort for an older fellow. Imagine MSM, Mic, dems, reps, insurance, banks, the 1% and then the challenge to register in even a majority of states
Easier to take over greens and convert to functional, but no indication he's thinking that.

[Apr 25, 2017] Proportionality the fairness of inequality

Notable quotes:
"... My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous. ..."
"... In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs. ..."
Apr 25, 2017 | The Unz Review
80 Comments

There was a time when boys played games of marbles following strict playground rules: contestants had to stand a prescribed distance away from the little pyramid of marbles, and chuck only marbles of the prescribed size. Rules ruled. Piaget was intrigued by the explanations children gave for moral judgements, and the playground is the arena in which the concept of fairness is honed.

Piaget followed a model which is rare nowadays. He observed his own children in great detail as they grew up. His was the least representative sample in the history of psychology. Nonetheless he launched the study of the development of morality, and the conception of fairness.

The majority of experimental studies done in psychological laboratories seem to show that even young children prefer equal shares rather than unequal shares. This would suggest that people have an innate preference for socialism and the re-distribution of wealth.

In fact, this is true only if people are asked to distribute goods between people who are unknown to them, and who have not behaved in any particular way which would make them consider that some were more worthy and deserving than others.

The moment you show that one person has been more helpful than another, or has worked harder than another, then judges believe that, as a matter of fairness, the more energetic and helpful person should get a greater share.

That is fair, after all, because those who were hard-working and helpful have deserved it because of their efforts. So although there are many studies suggesting that people do not like inequality, it turns out that what they most dislike is unfairness.

Once it can be shown that a distribution is fairly based on effort then respondents will tolerate and indeed require that the distribution of wealth is proportionate to effort and not just based on the mere fact of existing. People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.

Why people prefer unequal societies. Christina Starmans , Mark Sheskin & Paul Bloom Nature Human Behaviour 1 , 0082 (2017)doi:10.1038/s41562-017-0082

https://www.nature.com/articles/s41562-017-0082

Unusually for a scientific paper, it is a good read. What really matters in these experiments is context, and once context is provided then it is clear that people accept unequal societies so long as they are based on a fair allocation of rewards, proportional to contribution.

The authors say:

There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.

The authors review a long series of experiments which seem to show that children prefer absolute equality in the sharing of rewards. Inequality is certainly a focus of political concern. It attracts those who make bold complaints of the form "The top 1% of people own XX% of the wealth" where the implication is that the owned wealth should be 1% but for foul reasons is much higher than that. This statistic contains several errors, and tends to mislead.

http://www.unz.com/jthompson/loathing-wealth

By the way, it amuses me that people who strongly object to a person's general level of ability being represented "by a single figure" have no qualms about wealth being represented "by a single figure" despite it being based on chattels, residential property (sometimes minus mortgages, sometimes not), stocks and shares, bank accounts, pension rights totals (say, at 20 times annual payments), and other quasi-monetary benefits. Such critics should relax: although wealth estimates have methodological shortcomings, an overall figure gives a reasonable estimate for comparative purposes (as do estimates of general intelligence).

The Gini coefficient (0 is equitable distribution, 100 is outrageous inequity) is well-known, and usually widely quoted without comment, since the manifest goodness of equality is assumed to be agreed by all. Laboratory studies seem to confirm that people have a deep preference for equality.

So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?

We argue here that these two sets of findings can be reconciled through a surprising empirical claim: when the data are examined closely, it turns out that there is no evidence that people are actually concerned with economic inequality at all. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.

We suggest that the perception that there is a preference for equality arises through an undue focus on special circumstances, often studied in the laboratory, where inequality and unfairness coincide. In most situations, however, including those involving real-world distributions of wealth, people's concerns about fairness lead them to favour unequal distributions.

Anyone looking for evidence that people have a natural aversion to inequality will find numerous laboratory studies that seemingly confirm their view. For example, studies have found "a universal desire for more equal pay", "egalitarian motives in humans", "egalitarianism in young children", and that "equality trumps reciprocity". A Google Scholar search for "inequality aversion" yields over 10,000 papers that bear on this topic.

Furthermore, people appear to view the equal distribution of resources as a moral good; they express anger toward those who benefit from unequal distributions.

Indeed, these data might underestimate people's preferences for unequal distributions. One follow-up study contrasted Norton and Ariely's question about the percentage of wealth that should correspond to each quintile of the American population with a question about what the average wealth should be in each quintile. The former question resulted in an ideal ratio of poorest to wealthiest of about 1/4, but for the latter question the ratio jumped to 1/50. When the connection between the two questions was explained to participants, a majority chose the higher inequality ratio as reflecting their actual beliefs for both measures.

At this stage it should be made clear that all the "equality in the lab" researchers have not been telling lies. They are aware that inequality and unfairness are being confounded, but that message has been downplayed in the telling. From a research strategy perspective, I think it shows how a particular approach (strangers in a lab) fails to produce results which map onto real world observations. When participants come together without any back history, the ideal of equality rules. When the fuller context is given a chance to be considered, then subjects in an experiment have no hesitation in rewarding those people who rise early to go to work over those who rise late to do nothing. Children not only reward those who have done more work, but also those who have been kind and helpful.

It follows, then, that if one believes that (a) people in the real world exhibit variation in effort, ability, moral deservingness, and so on, and (b) a fair system takes these considerations into account, then a preference for fairness will dictate that one should prefer unequal outcomes in actual societies.

One proposal is that fairness intuitions are rooted in adaptations for differentially responding to the prosocial and antisocial actions of others. For cooperation and pro-sociality to evolve, there has to be some solution to the problem of free-riders, cheaters, and bad actors. The usual explanation for this is that we have evolved a propensity to make bad behaviour costly and good behaviour beneficial, through punishment and reward

Our own argument against a focus on inequality is a psychological one. In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se . Rather, people have an aversion toward unfairness, and under certain special circumstances this leads them to reject unequal distributions. In other conditions, including those involving real-world distributions of wealth, it leads them to favour unequal distributions. In the current economic environment in the United States and other wealthy nations, concerns about fairness happen to lead to a preference for reducing the current level of inequality. However, in various other societies across the world and across history (for example, when faced with the communist ideals of the former USSR), concerns about fairness lead to anger about too much equality.

I have quoted from this paper at some length, because it is unusually well-written, clearly describes its techniques and its arguments, follows a logical sequence, and deals with an important topic. My final conclusion is that it leads us to an important general conclusion: the repeated finding of an effect (in this case an apparent preference for equality) should not stop us from digging deeper to check whether the methods are really picking up the causes of decisions, and whether the general effect persists in real-world settings. It turns out that when distributing rewards to unknown people, equal shares is probably a good strategy; but when distributing rewards to people who have shown varying levels of contribution, unequal rewards are often fairer.

Should we have a coefficient to measure to what extent a society provides appropriate rewards for varying levels of social contribution (effort, ability, pro-social acts)? What to call it? The Reward coefficient? Are social mobility measures an acceptable substitute?

Discarding Robespierre, should our chant instead be "Liberty, Proportionality, and Selective Association"? I may need to work on these details a little longer.

dearieme , April 18, 2017 at 2:33 pm GMT \n

"Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and ..: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?

P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. Read More

Santoculto , April 18, 2017 at 3:41 pm GMT \n

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.

You start well, =) But not, =( Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being. So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism* Likely in some official socialist countries has been but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. Read More

Santoculto , April 18, 2017 at 3:51 pm GMT \n

That is fair, after all, because those who were hard-working and helpful have deserved it because of their efforts.

Yes, this is the psychology of the masses or of the worker, more hard-WORKing you are, better, but some people take note that a lot of non-hard worker are significantly more gratified than majority. So this people perceive a big bug in the logic of [capitalistic] meritocracy.

"Hard-worker = deserved to earn more"

but

A lot of those on the elite are not hard-worker, so

And "hard-workness" is heritable/inheritable too, so something that you born with more facility to engage reduce considerably the idea that people who are not hard-working, depending for what, are just lazy. The own idea of lazyness seems complicated in this case if it is usually based on the idea of "free will", if you are lazy it's because you want to be like that.

Sloth is lazy **

Or s/he is just slow **

Slow and lazy is the same*

People who work-hard tend to work- fast* Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

dc.sunsets , April 18, 2017 at 4:40 pm GMT \n
Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania. It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

I also note that the first thing deleted from any propaganda piece we read in "the news" is context. We can't have the rubes deciding that it's okay for the surgeon who saved their mom's life after her stroke to drive a nicer car and maybe KEEP what he or she made in income last year. (Ramping taxes on the "working wealthy," i.e., people who have high incomes but are not Gates-Buffet Rich, is Job One for Leftists when they're not celebrating another white guy suicide.) Read More Agree: Daniel Chieh

Jason Liu , April 18, 2017 at 7:08 pm GMT \n
It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense. Read More

Mao Cheng Ji , April 18, 2017 at 7:16 pm GMT \n

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.

Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings – in abstract – may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country – I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless Read More

Daniel Chieh , April 18, 2017 at 8:56 pm GMT \n
@Mao Cheng Ji

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.
Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings - in abstract - may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country - I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless... I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

Reg Cæsar , April 18, 2017 at 8:57 pm GMT \n

The moment you show that one person has been more helpful than another, or has worked harder than another, then judges believe that, as a matter of fairness, the more energetic and helpful person should get a greater share.

And folks disagree on who that helper might be. Compare people's reaction to the Koch brothers and to George Soros.

OutWest , April 18, 2017 at 10:30 pm GMT \n
Perhaps it's the engineer in me, but I've observed that some driving force is necessary to make a process run. Voltage, temperature/pressure difference, or maybe wealth disparity are examples.

I had the choice of working in a local mill for good wages but a killing environment, or working my way through college with little money. Intermediate term sacrifice paid long term dividends for me and my kids/grandkids. There's also a good argument to be made that society is also better served by such self-serving efforts.

If everyone is truly equal, what is there to drive society?

Santoculto , April 18, 2017 at 10:49 pm GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

Capitalism is a short term/consumerism and parasitic-like socio-economic system. Capitalism is advantageous but it depend for whom. It's not adaptative only for short term.

Svigor , April 19, 2017 at 12:02 am GMT \n

It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense.

More "contextual" or "default" than primal or unthinking. Nobody's earned a bigger or smaller share, because everyone's qualification is simply showing up and being included in deliberation over division of spoils.

the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings – in abstract – may or may not care about.

I usually find your posts to be scheisse, but this bit (I snipped out the preamble advisedly) is pretty good, if hyperbolic. Leftist indoctrination and intimidation infect everything, and must be controlled for to get at the truth. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Svigor , April 19, 2017 at 12:05 am GMT \n

If everyone is truly equal, what is there to drive society?

Proportional rewards. Decouple rewards from production, that's what really kills motivation. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Trollmonster666 , April 19, 2017 at 12:37 am GMT \n
@dearieme "Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and .....: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?


P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. How about symmetry? Read More

Daniel Chieh , April 19, 2017 at 3:08 am GMT \n
@Santoculto Capitalism is a short term/consumerism and parasitic-like socio-economic system. Capitalism is advantageous but it depend for whom. It's not adaptative only for short term. Seems to me that most of human history of every civilization involved property at least since the dawn of agriculture allowed wealth to be stored in the form of grain. Property-less cultures were usually cultures that lacked the ability for an individual to accumulate wealth; however, only in cultures that had property allowed for the rise of more specialized classes of soldiery, tradesmen, and craftsmen. Read More
Wally , April 19, 2017 at 4:47 am GMT \n
It's revealing that those who advocate for 'equality' generally have much higher incomes than those they advocate for.

The Left has slapped together a coalition of Parasites and Perverts and seem to think they can beat the Productive.

socialism:

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/03/21/20170328_socialist.png

The Purpose of Political Correctness,
To Hide the Dirty Secrets of Socialism

https://www.lewrockwell.com/2016/12/thomas-dilorenzo/real-purpose-pc/ Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Wally , April 19, 2017 at 4:56 am GMT \n
300 Words @Mao Cheng Ji

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.
Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings - in abstract - may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country - I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless... Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/

excerpt:

And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Read More
Mao Cheng Ji , April 19, 2017 at 6:56 am GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

However, to entertain your proposition, please tell us more about your friend.

He wasn't a friend, just someone I met a few times; friend of a friend. For example: when leaving a party, the guy would just put on a jacket, anyone's jacket. Because a jacket is a jacket, it's a thing that serves the purpose. This sort of thing.

Native Americans did on wives

So, maybe they had some form of 'ownership' of women, so what. I'm not saying that there can be only two kinds of social organizations, there are many. For us, for our natural habitat, 'ownership', 'wealth', 'property', 'wage', 'debt', 'market', 'deserves' are the most basic concepts that we never question. They are our deepest underlying assumptions, internalized from the most early age. But I don't think they are embedded in human nature. Read More

JackOH , April 19, 2017 at 8:00 am GMT \n
Whew! I'd sooner expect to share a bourbon with Sasquatch and Yeti than to sight those surely mythical critters, Equality and Fairness. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
Mao Cheng Ji , April 19, 2017 at 9:57 am GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/

excerpt:

And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Michael Chrichton on the not-so-noble savages.

I don't think I mentioned any 'noble savages'; all I said was that people are conditioned by their social environment. I guess you didn't like the word 'corrupted'? Okay, I take it back, it is, perhaps, unnecessarily judgemental. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Santoculto , April 19, 2017 at 11:19 am GMT \n
@Daniel Chieh Seems to me that most of human history of every civilization involved property at least since the dawn of agriculture allowed wealth to be stored in the form of grain. Property-less cultures were usually cultures that lacked the ability for an individual to accumulate wealth; however, only in cultures that had property allowed for the rise of more specialized classes of soldiery, tradesmen, and craftsmen. So you're saying that capitalism and accumulation of wealth is basically the same thing* Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Santoculto , April 19, 2017 at 11:26 am GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/
excerpt:


And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Yes, but it don't legitimate white europeans to act in the same way in "foreign' lands,

White colonizers just act in the same way not-so-noble savage ones,

No superiority there. Read More

Santoculto , April 19, 2017 at 11:42 am GMT \n

People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.

People don't prefer unequal societies, they tend to "rationalize' that this is a necessary evil. But i doubt most people prefer unequal/inequal societies Read More

Santoculto , April 19, 2017 at 11:47 am GMT \n

So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?

Bigger groups, bigger [genetic/instinctive levels of] diversity* Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Daniel Chieh , April 19, 2017 at 2:24 pm GMT \n
200 Words @Mao Cheng Ji

However, to entertain your proposition, please tell us more about your friend.
He wasn't a friend, just someone I met a few times; friend of a friend. For example: when leaving a party, the guy would just put on a jacket, anyone's jacket. Because a jacket is a jacket, it's a thing that serves the purpose. This sort of thing.

Native Americans did on wives
So, maybe they had some form of 'ownership' of women, so what. I'm not saying that there can be only two kinds of social organizations, there are many. For us, for our natural habitat, 'ownership', 'wealth', 'property', 'wage', 'debt', 'market', 'deserves' are the most basic concepts that we never question. They are our deepest underlying assumptions, internalized from the most early age. But I don't think they are embedded in human nature. So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist. Read More

dearieme , April 19, 2017 at 2:31 pm GMT \n
@Trollmonster666 How about symmetry? "How about symmetry?" I think we're looking for a word that contains some of the sentiment of 'fraternity' without the notion, certainly apparent in retrospect, of being compulsory.
Mao Cheng Ji , April 19, 2017 at 3:15 pm GMT \n
200 Words @Daniel Chieh So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist.

but it is an useful social technology that promotes development of society

I don't know what 'useful' might mean in this context. Inevitable, that's for sure. Rousseau wrote:

The first person who, having enclosed a plot of land, took it into his head to say this is mine and found people simple enough to believe him was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had some one pulled up the stakes or filled in the ditch and cried out to his fellow men: "Do not listen to this imposter. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!"

But then he writes:

But it is quite likely that by then things had already reached the point where they could no longer continue as they were. For this idea of property, depending on many prior ideas which could only have arisen successively, was not formed all at once in the human mind. It was necessary to make great progress, to acquire much industry and enlightenment, and to transmit and augment them from one age to another, before arriving at this final state in the state of nature.

Social evolution Read More

OutWest , April 19, 2017 at 3:45 pm GMT \n
If we were truly equal, none of us could be smarter, more industrious and certainly not more successful than the least of us. The kids seem capable of grasping this fact.

Maybe unqualified "equal" is the wrong concept as a universal parameter of fair play. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

LemmusLemmus , Website April 19, 2017 at 4:59 pm GMT \n
@James Thompson Yes, my mistake. Have corrected it to 0 for equality, 100 for inequality. Um, usually, 1 is maximum inequality (though Wikipedia says, quite logically, that you can say "100%"). Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Philip Owen , April 19, 2017 at 11:16 pm GMT \n
I am British but I work a lot in Russia. I have noticed that the Russians are prepared to put more effort into punishing a wrongdoer, in everyday affairs, than the British, who usually just stop contact. Also, Russians have a much more developed, disproportionate to my view, sense of revenge and will put resources into it. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
ThreeCranes , April 20, 2017 at 1:36 am GMT \n
200 Words If I recall correctly from my reading of Frans DeWaal's work with chimpanzees at the Yerkes National Primate Research Center, two experiments seem relevant here.

In one, two chimps in adjoining cages were given treats for pressing a button or pulling a lever. One chimp was given a slice of cucumber, the other a grape, which as a sweet is the more desirable of the two rewards. The chimp who was given the cucumber, seeing that his peer was given a better reward for the same endeavor eventually went on strike. This is suggestive of a feeling of unfairness, injustice and resentment.

In another trial, every time one chimp was rewarded with a treat for pulling the lever his companion–visible to him–was given a electric shock. After a few trials chimp #1 made the connection and–out of sympathy apparently–stopped pulling the lever, forsaking his treat.

So, DeWaal concludes that "Morality" or in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality. It is part and parcel of and to our nature as primates and builds on fellow-feeling. Hard to argue with this. Read More

ThreeCranes , April 20, 2017 at 1:43 am GMT \n
From Wiki

"In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs.

He and his students have also extensively worked on fairness, leading to a video that went viral on inequity aversion among capuchin monkeys. The most recent work in this area was the first demonstration that given a chance to play the Ultimatum game, chimpanzees respond in the same way as children and human adults by preferring the equitable outcome."

utu , April 20, 2017 at 5:05 am GMT \n
@ThreeCranes If I recall correctly from my reading of Frans DeWaal's work with chimpanzees at the Yerkes National Primate Research Center, two experiments seem relevant here.

In one, two chimps in adjoining cages were given treats for pressing a button or pulling a lever. One chimp was given a slice of cucumber, the other a grape, which as a sweet is the more desirable of the two rewards. The chimp who was given the cucumber, seeing that his peer was given a better reward for the same endeavor eventually went on strike. This is suggestive of a feeling of unfairness, injustice and resentment.

In another trial, every time one chimp was rewarded with a treat for pulling the lever his companion--visible to him--was given a electric shock. After a few trials chimp #1 made the connection and--out of sympathy apparently--stopped pulling the lever, forsaking his treat.

So, DeWaal concludes that "Morality" or in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality. It is part and parcel of and to our nature as primates and builds on fellow-feeling. Hard to argue with this.

in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality

I think it should be pretty obvious because lack of fairness is just like lack of symmetry in some geometric pattern. It is visible right away. It strikes you but in amoral landscape. It takes much more effort (cognitive, conceptual and linguistic) to justify and eventually internalize the lack of fairness. The default is fairness except for the ones who are not fair because they are morally defective. They are just tone deaf. They do not see the beauty of Kant's categorical imperatives.

Wally , April 20, 2017 at 5:10 am GMT \n
@Santoculto Yes, but it don't legitimate white europeans to act in the same way in ''foreign' lands, ;)

White colonizers just act in the same way not-so-noble savage ones, ;)

No superiority there. According to your Leftist logic, American Indians were xenophobic and are to be condemned for resisting European migrants.

Wally , April 20, 2017 at 5:22 am GMT \n
@Santoculto

People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.
People don't prefer unequal societies, they tend to ''rationalize' that this is a necessary evil. But i doubt most people prefer unequal/inequal societies... There never has been and never will be 'equal' human societies.
The ones that tried were dismal failures simply because we are not all equal. Read More
Wally , April 20, 2017 at 5:26 am GMT \n
@ThreeCranes From Wiki

"In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs. He and his students have also extensively worked on fairness, leading to a video that went viral on inequity aversion among capuchin monkeys. The most recent work in this area was the first demonstration that given a chance to play the Ultimatum game, chimpanzees respond in the same way as children and human adults by preferring the equitable outcome." Who decides what is "equitable"? Read More

Bolt , April 20, 2017 at 6:39 am GMT \n
Counting accumulations of the measurable as a method of judging fairness or in/equality would seem a materialist trap, very US consumer. I see no mention of Bhutan's happiness index here.

Those who decide not to participate in work towards normalized social goals have a role too; they give the overachievers a group to compare themselves with and a consequent boost to their psychic well being. What's the point of a Lexus if everyone drives them? Read More

RobRich , Website April 20, 2017 at 9:50 am GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous. Native Americans were devout property owners. The myth of native communism has long been debunked. Read More

David , April 20, 2017 at 11:39 am GMT \n
@dearieme "Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and .....: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?


P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. I think Jesus lacked the instinct of moral indignation at free-loaders. That, for example, he couldn't see how impossible it would be to organize labor if everyone got paid the same, no matter how long he worked.

Lots of times, what Jesus recommends is totally effective but If Christian societies had ever seriously extended the forgive-your-neighbor principle regionally, let alone universally, their guts would be in seven times seventy places.

The Good Samaritan was maybe the only guy walking down the road that day that didn't actually know the jerk who'd been beaten and robbed, likely by somebody he swindled. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

ThreeCranes , April 20, 2017 at 11:41 am GMT \n
@Wally Who decides what is "equitable"? Natural selection, apparently.
Santoculto , April 20, 2017 at 12:09 pm GMT \n
@Wally There never has been and never will be 'equal' human societies.
The ones that tried were dismal failures simply because we are not all equal. Thank you for this clarification, i don't knew. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Agent76 , April 20, 2017 at 12:53 pm GMT \n
January 20, 2017 Rothschild Family Wealth is Five Times that of World's Top 8 Billionaires Combined

A recent report by Oxfam International highlights the dramatic rise in income equality by noting that the combined wealth of the world's top 8 individual billionaires is more than the lower half of the world's population, some 3.6 billion people. The intention of the report was to bring awareness to the unfairness and injustice inherent in our global economic system.

http://www.wakingtimes.com/2017/01/20/rothschild-family-wealth-five-times-worlds-top-8-billionaires-combined/

May 21, 2013 Why the whole banking system is a scam – Godfrey Bloom MEP

• European Parliament, Strasbourg, 21 May 2013

• Speaker: Godfrey Bloom MEP, UKIP (Yorkshire & Lincolnshire)

Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

anonymous , April 20, 2017 at 1:27 pm GMT \n
200 Words Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But and here's the rub should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution-a prospect that, to put it mildly, is not very likely–except possibly in the collective minds of the Sanderistas. Read More

hyperbola , April 20, 2017 at 1:29 pm GMT \n
Generation of "responses" is promulgated by keeping the level of discussion very simple minded and generic: equality vs reward-for-effort. Major considerations are (deliberately?) ignored with such a formulation.

Equality is easy to calculate and apply. Reward-for-effort is not and is easily subject to "corruption" (over-reward due to power-control that can include abuse of those "under-rewarded"). Anyone who advocates "reward-for-effort" therefore needs to START by proposing a system that guarantees that this does not degenerate into corruption.

Has anyone ever been successful in establishing a social system in which "reward-for-effort" did NOT degenerate into corruption? Perhaps as long ago as Plato usable systems were proposed (maximum allowed difference between poor/rich = 4), but these have never been implemented because of the tendency to corruption inherent in "reward-for-effort"?

Certainly we have plenty of evidence that present practice of "reward-for-effort" is highly corrupted. Read More

Daniel Chieh , April 20, 2017 at 2:05 pm GMT \n
200 Words @hyperbola Generation of "responses" is promulgated by keeping the level of discussion very simple minded and generic: equality vs reward-for-effort. Major considerations are (deliberately?) ignored with such a formulation.

Equality is easy to calculate and apply. Reward-for-effort is not and is easily subject to "corruption" (over-reward due to power-control that can include abuse of those "under-rewarded"). Anyone who advocates "reward-for-effort" therefore needs to START by proposing a system that guarantees that this does not degenerate into corruption.

Has anyone ever been successful in establishing a social system in which "reward-for-effort" did NOT degenerate into corruption? Perhaps as long ago as Plato usable systems were proposed (maximum allowed difference between poor/rich = 4), but these have never been implemented because of the tendency to corruption inherent in "reward-for-effort"?

Certainly we have plenty of evidence that present practice of "reward-for-effort" is highly corrupted. No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away – it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people – the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system. Read More

Daniel Chieh , April 20, 2017 at 2:10 pm GMT \n
@anonymous Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But...and here's the rub...should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution---a prospect that, to put it mildly, is not very likely--except possibly in the collective minds of the Sanderistas. The most psychologically difficult part of the modern economy is "why should someone be able to make more money by having money" through interest-bearing systems. While its very logical from a capitalistic perspective, its definitely the part which I think our instincts find least understandable.

The rich history against usury throughout history, including in the East, are a good example that many people found the notion difficult to accept especially when it seemed like it accumulated wealth in a class without connection to historical notions of land, protection, fealty, etc. Read More

pseudonym , April 20, 2017 at 2:13 pm GMT \n
@Santoculto
This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. You're confusing socialism with Socialism.

Two people? Each get 1/2

Eight people? Each get 1/8

Read the article again, it has nothing to do with Socialism, and everything to do with socialism. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

anon , April 20, 2017 at 3:19 pm GMT \n
@dc.sunsets Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania. It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

I also note that the first thing deleted from any propaganda piece we read in "the news" is context. We can't have the rubes deciding that it's okay for the surgeon who saved their mom's life after her stroke to drive a nicer car and maybe KEEP what he or she made in income last year. (Ramping taxes on the "working wealthy," i.e., people who have high incomes but are not Gates-Buffet Rich, is Job One for Leftists when they're not celebrating another white guy suicide.)

Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania.

However, the debt bubble is/was the result of the pre-existing power and greed of the financial sector to corrupt the political/media class into rigging the game. That power and greed was restrained until the Soviet Union collapsed.

It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

It will decrease dramatically when unrestrained usury leads to economic collapse as it always does for a simple arithmetic reason

million people with $200/week to spend = $200 million demand

million people with $200/week
- repaying $150/week on their previous loans
- leaving $50/week to spend
= $150 million to the financial sector and $50 million demand

non-productive usury is parasitic and once unrestrained will always rapidly destroy an economy Read More Agree: anarchyst Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Perplexed , April 20, 2017 at 3:26 pm GMT \n
@Daniel Chieh So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist. In the New York Times Magazine's first "Ethicist" column, Randy Gerber set a problem: You're leaving a restaurant on a rainy day and find that someone took your umbrella from the pail by the door. Is it okay to take someone else's? He said yes (but, if I remember correctly, only one of equal or lesser value to yours; no advice on how to evaluate a pailful of black umbrellas, though; and what if all of them are better than yours? And then, if you refrain from taking a better one, you'll still get wet, which was the justification for taking someone else's in the first place. And if you take a cheaper one, isn't that stealing from the lower classes?). Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Perplexed , April 20, 2017 at 3:43 pm GMT \n
@Bolt Counting accumulations of the measurable as a method of judging fairness or in/equality would seem a materialist trap, very US consumer. I see no mention of Bhutan's happiness index here.

Those who decide not to participate in work towards normalized social goals have a role too; they give the overachievers a group to compare themselves with and a consequent boost to their psychic well being. What's the point of a Lexus if everyone drives them? Are smokers included in Bhutan's happiness index? They can get five years in prison for violating the draconian rules. But they're smokers, so nobody cares, right? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

David , April 20, 2017 at 4:04 pm GMT \n
A comment about good science and good writing. Darwin wasn't a bad scientist or writer. Same for Faraday and Feynman. E. O. Wilson comes to mine. And Mr James Thompson is pretty good, too. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
Mao Cheng Ji , April 20, 2017 at 5:17 pm GMT \n
@anonymous Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But...and here's the rub...should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution---a prospect that, to put it mildly, is not very likely--except possibly in the collective minds of the Sanderistas.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation

No, true economic equality can only exist when no one is paid anything at all. Everything is freely shared, like, say, books in the library, or food between family members, or the well in the village center. Simple as that. Read More

Inertiller , April 20, 2017 at 5:18 pm GMT \n
200 Words Thompson sure sounds scientific, until he denigrates the scientific process. "The lab isn't like the real world." Readers should give up right there, because refuting gibberish takes time and a little thought.

But the main argument (or apology) from writers like Thompson (or Thomas Friedman) is that those that are more equal than you stoically pulled themselves up harder by their own shoes than you did. Your complaints give you away.

The appeal to these folksy simple beliefs is enourmous but many of the wealthy will maintain that they've been granted wealth because of God's will, or tithing to their church.

So fans of the meritocratic fraud will work harder. (Working dumber doesn't mean anything to them.) Just think, one day, if you're nice enough, your large corporation can break the law with impunity, you can write a a piece of software for the FIRE sector, start your own web blog on politics that datamines (for free) the thoughts, snark and feelings of the proles, and when you are CEO you'll tell the world you damn well earned all of it. Why wouldn't you? Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

dearieme , April 20, 2017 at 5:48 pm GMT \n
@Daniel Chieh The most psychologically difficult part of the modern economy is "why should someone be able to make more money by having money" through interest-bearing systems. While its very logical from a capitalistic perspective, its definitely the part which I think our instincts find least understandable.

The rich history against usury throughout history, including in the East, are a good example that many people found the notion difficult to accept especially when it seemed like it accumulated wealth in a class without connection to historical notions of land, protection, fealty, etc. "why should someone be able to make more money by having money" through interest-bearing systems

That's been put a stop to by zero and negative interest rates. For a few years at least. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Zzz , April 20, 2017 at 5:58 pm GMT \n
@Daniel Chieh No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away - it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people - the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system.

too corrupt will become incapable of outcompeting a less corrupt and more efficient system.

What if everything is one same global system? It competing with what then? Read More

Daniel Chieh , April 20, 2017 at 6:55 pm GMT \n
@Zzz

too corrupt will become incapable of outcompeting a less corrupt and more efficient system.
What if everything is one same global system? It competing with what then? Ah, yes, one world government. The solution to all ills, how silly of me not to think of it. In all realism, the only way such a system will rise to dominance is through outcompeting all other memes. It hasn't, so there's no egg for this chicken to rise about.

When attempted, as in socialistic governments, it gets corrupted because basically, human nature. Its only been shown to work in monestaries where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate. I'll revisit the vitality of it after Giant Meteor visits us, but I suspect the land-acquiring raiders will still come out ahead. Read More

Daniel Chieh , April 20, 2017 at 7:13 pm GMT \n
@Mao Cheng Ji

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation
No, true economic equality can only exist when no one is paid anything at all. Everything is freely shared, like, say, books in the library, or food between family members, or the well in the village center. Simple as that. So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. Read More

Someone in this, and too busy. , April 20, 2017 at 9:40 pm GMT \n
400 Words It's an interesting chart. Being involved with consumer bankruptcy work, I regularly meet and talk to many people who fit right into the lower end of the chart. My anecdotal opinion is that I find charts like the this one be inaccurate and skewed representations of the underlying condition of the people involved.

To begin, the chart does not associate dollar figures the various percentages of wealth. I haven't made a career of researching these facts, but I've seen the figure around that the lowest 20% of the population has a negative net worth. This means that if I could talk the lowest 20% of the people referenced in the chart into coming into my office and filing a Chapter 7 Bankruptcy, a legal action the majority of them would surely qualify for, and if, after the bankruptcy, I gave them $10 they would, all of a sudden, be thrown up into the the next highest most wealthy group of Americans. I"ve no time for researching it today, but I suspect it wouldn't take much more to push the forth lowest group into the lower end of the middle.

Another one of my other problems with these charts is they frequently exclude items most of us consider to be forms of wealth, in their determination of how much wealth people actually have. Pensions, including vested pensions, are frequently excluded. The rights to receive social security and other benefit programs is almost always excluded (maybe they are telling us something). This, of course greatly amplifies the sense that their are a lot of terribly destitute people around. Without seeing the dollar numbers or the components of the wealth included and excluded, these types of charts lend themselves to distortions.

To accumulate wealth at any level you have to have an interest in accumulating wealth. Accumulating wealth is a lot different than being showered with it. Everyone wants to win the lotto. Far fewer will save $100. Not with the competition from vacations and automobiles and electronic entertainment. It's not just hippies or tribesmen with no concept of competition who will not accumulate. I recommend that anyone who believes there is not a large percentage of the population that has absolutely no interest in taking any action designed toward accumulating wealth, who actively use it with not intention of replacing it, get out a bit more, meet new people just to know them. You don't have to invite them to your home. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Joe Wong , April 20, 2017 at 10:13 pm GMT \n
@Santoculto

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. This comment reflects a serious case of redneck capitalist paranoia syndrome.

We all know USA is a Orwellian oligarchy police state and it is a warmonger and war criminal on the international arena despite it claims itself a democracy, so shall we say democracy does not work because USA's failure to implement democracy ideally? On the same token, it is moronic to say Socialism does not work because some jackals hijacked Socialism for their own greed just like the 'god-fearing' morally defunct evil 'puritans' hijacked democracy in the USA to fill their own greed. Read More

Joe Wong , April 20, 2017 at 10:25 pm GMT \n
@Jason Liu It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense. Perhaps inequality is inevitable and way of life, but definitely for the humanity sake we cannot grant it moral legitimacy, inequality is the dark side of humanity, it should always be treated as it is. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Joe Wong , April 20, 2017 at 10:58 pm GMT \n
@RobRich Native Americans were devout property owners. The myth of native communism has long been debunked. I would be very sceptical about any proof provided by the White to debunk anybody anything, historically the Whtie demonizes or badmouths others with fake news to make themselve superior. Orientalism and casting South American civilizations as bloodthirty barbarians are some of the ancient examples, phantom WMD and Maidan Square mob putsch are the recent examples. Read More Troll: Daniel Chieh
Joe Wong , April 20, 2017 at 11:15 pm GMT \n
@OutWest Perhaps it's the engineer in me, but I've observed that some driving force is necessary to make a process run. Voltage, temperature/pressure difference, or maybe wealth disparity are examples.

I had the choice of working in a local mill for good wages but a killing environment, or working my way through college with little money. Intermediate term sacrifice paid long tem dividends for me and my kids/grandkids. There's also a good argument to be made that society is also better served by such self-serving efforts.

If everyone is truly equal, what is there to drive society? I remember one epsoide in the Star Trek, Jean-Luc Picard explained humanity to an less developed alien that in the 23rd century, human is no longer valued material procession, human being is motived by wanting to excel, to make himself and the human being better. Are you saying we never can get there? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Joe Wong , April 20, 2017 at 11:29 pm GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/
excerpt:


And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

I am very sceptical about any proof provided by the White to debunk anybody anything, historically the White demonizes or badmouths others with fake news to make themselves superior and righteous. Orientalism and casting South American civilizations as bloodthirsty barbarians are some of the ancient examples, phantom WMD and anti-communism are the recent examples. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Astuteobservor II , April 21, 2017 at 12:47 am GMT \n
@Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. what he meant is that it wouldn't matter, because there will be more pizza. so why would anyone care about the last slice? of "a" pizza. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Bolt , April 21, 2017 at 4:15 am GMT \n
@Daniel Chieh Ah, yes, one world government. The solution to all ills, how silly of me not to think of it. In all realism, the only way such a system will rise to dominance is through outcompeting all other memes. It hasn't, so there's no egg for this chicken to rise about.

When attempted, as in socialistic governments, it gets corrupted because basically, human nature. Its only been shown to work in monestaries where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate. I'll revisit the vitality of it after Giant Meteor visits us, but I suspect the land-acquiring raiders will still come out ahead.

..where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate..

This ignores the cultural conditioning accepted by the group, both the monk's and the west's.
Human nature is a social construct – you can't argue on the one hand that we're are above animals because "self awareness", but on the other hand human nature/law of the jungle/social Darwinism determines our interactions.
The point is, the monks are trained in self awareness and act as a guide to accessing our better natures – fair and equitable distribution should be a hallmark of our humanity not an exception. Read More

Mao Cheng Ji , April 21, 2017 at 6:55 am GMT \n
200 Words @Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value.

So who gets the last slice of pizza?

Okay, let's see. Where I'm from, the social norm was that no one takes the last piece of bread. What you do, you break it, and take half. Then the next person can take half of that, and so on, until it turns into a crumb.

In other places I've been, the norm was: you point to the last slice and ask: 'anyone want this?' Everyone would say 'no', and then you can take it.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.

As for

Bushmen practiced both infanticide as well as abandoning the old.

what of it? Social norms ('morality') are not absolute, they are dictated by the environment. Where the alternative to infanticide and abandoning the old is extinction, they become social norms. Read More

EH , April 21, 2017 at 6:57 am GMT \n
300 Words Additional monetary wealth is valued in relation to existing wealth, so that a 1% increase has the same perceived utility whether one has $1M or $1000. This implies a logarithmic utility function for monetary wealth, an idea which is accepted in economics since it is equivalent to setting an investment goal of maximizing percentage returns, but the inescapable mathematical implication of logarithmic utility of wealth is unpopular among economists. If we assume that people have roughly equal capacity for enjoyment, then the aggregate utility of wealth for a society is maximized by its members having roughly equal wealth. For instance, a person with $100 gets a utility of log(100) = 2 from that, and someone with $1B gets a utility of log(10^9) = 9. If the billionaire's wealth is distributed so that 10M people each have $100, then the aggregate utility of that $1B rises from 9 to 20M, or over two million times as much utility.

Since wealth is valued logarithmically the effectiveness of rewards falls off exponentially, which means either that it doesn't make sense to give large rewards to individuals (assuming a goal of maximizing aggregate utility), or that rewards should be exponentially larger to maintain their effectiveness (assuming a goal of making rewards effective in individual cases). The latter way of thinking by people pursuing rewards for themselves is why wealth inequality is so great. At each step of the way, people aim to get that next few percent increase in their wealth, which becomes larger and larger in absolute terms. It's perfectly rational from the view of each individual, but it results in nearly all monetary rewards going to the people who get the least marginal utility from that money.

Those who contribute to society need to be rewarded to encourage more such contributions, but money quickly becomes an uneconomical way of rewarding people once they have more than enough for their needs - other rewards such as status become more effective and affordable for society. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

John Smith , April 21, 2017 at 7:56 am GMT \n
@Santoculto

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. I must object.

Socialism does re-distribute the meager wealth of the working class into the pockets of the non working class and state owned business in exchange for handouts designed to keep you dependent on a system that hates you. Read More

dearieme , April 21, 2017 at 9:25 am GMT \n
@Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. "So who gets the last slice of pizza?"

You spin a penny. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Daniel Chieh , April 21, 2017 at 1:50 pm GMT \n
@Bolt

..where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate..
This ignores the cultural conditioning accepted by the group, both the monk's and the west's.
Human nature is a social construct - you can't argue on the one hand that we're are above animals because "self awareness", but on the other hand human nature/law of the jungle/social Darwinism determines our interactions.
The point is, the monks are trained in self awareness and act as a guide to accessing our better natures - fair and equitable distribution should be a hallmark of our humanity not an exception. We aren't really all that self-aware. Even the existence of free will may be in doubt.

More importantly, as stated before, it doesn't work to outcompete other models. The monks might indeed have a successful vow of poverty, but then people who don't have a vow of poverty but with bigger axes come and take everything they have.

The way I read your sentence is to advocate self-destruction, essentially, as a hallmark of human nature. I don't agree. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Daniel Chieh , April 21, 2017 at 1:59 pm GMT \n
200 Words @Mao Cheng Ji

So who gets the last slice of pizza?
Okay, let's see. Where I'm from, the social norm was that no one takes the last piece of bread. What you do, you break it, and take half. Then the next person can take half of that, and so on, until it turns into a crumb.

In other places I've been, the norm was: you point to the last slice and ask: 'anyone want this?' Everyone would say 'no', and then you can take it.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.


As for


Bushmen practiced both infanticide as well as abandoning the old.
...what of it? Social norms ('morality') are not absolute, they are dictated by the environment. Where the alternative to infanticide and abandoning the old is extinction, they become social norms.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.

Yup. And yet you seem knowledgeable enough not to need me to tell you the obvious results of it because it happened historically and in reality – punishment systems resulted in people minimizing effort. Even in North Korea, for example, the government found that by even slightly increasing liberalization of farms and allowing some percentage of crops to be sold for individual possession increased productivity by double-digit amounts.

People work harder when they feel like they will own the results. Negative consequences can only motivate insofar as punishment motivated slaves – they will do the minimal effort. Indeed, outperforming others can get you shamed because of that very mental aspect of proportionality.

Lack of property ownership just doesn't work, not with our brains the way it is.

This doesn't even go into aspects of the economy that are nonfungible, cannot be increased and inherently limiting, such as high productivity land, something which humanity once had to highly focus on. Now, Rousseau perhaps understood this, and deplored it – but it doesn't change the fact that was the most efficient way to develop for humanity. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Wizard of Oz , April 21, 2017 at 2:57 pm GMT \n
@Mao Cheng Ji

but it is an useful social technology that promotes development of society
I don't know what 'useful' might mean in this context. Inevitable, that's for sure. Rousseau wrote:

The first person who, having enclosed a plot of land, took it into his head to say this is mine and found people simple enough to believe him was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had some one pulled up the stakes or filled in the ditch and cried out to his fellow men: "Do not listen to this imposter. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!"
But then he writes:

But it is quite likely that by then things had already reached the point where they could no longer continue as they were. For this idea of property, depending on many prior ideas which could only have arisen successively, was not formed all at once in the human mind. It was necessary to make great progress, to acquire much industry and enlightenment, and to transmit and augment them from one age to another, before arriving at this final state in the state of nature.
Social evolution... Maybe you are oversimplifying tbe position you are arguing against. It is easy when discussing human nature to dismiss the idea that we have genes for respecting or being greedy for property rights but the way to look at it is different.

Start by considering what is objectively good for enjoyable human society, especially on a small scale, then consider what programming might be conducive to it. Just as it is a priori likely thst there would be some genetic programming to help us not to be fooled by liars the strong and reciprocal feeling for "mine" and "thine" needs programming that prevents taking no thought for the morrow and being fecklessly indifferent to people damaging the tools and other artefacts one has made. Read More Agree: Daniel Chieh

Santoculto , April 21, 2017 at 4:43 pm GMT \n
@Joe Wong This comment reflects a serious case of redneck capitalist paranoia syndrome.

We all know USA is a Orwellian oligarchy police state and it is a warmonger and war criminal on the international arena despite it claims itself a democracy, so shall we say democracy does not work because USA's failure to implement democracy ideally? On the same token, it is moronic to say Socialism does not work because some jackals hijacked Socialism for their own greed just like the 'god-fearing' morally defunct evil 'puritans' hijacked democracy in the USA to fill their own greed. Your opinion

but the truth

"Socialism" is even worse than capitalism, this is its monumental sin.

Be worse than a tra$h called capitalism. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Santoculto , April 21, 2017 at 4:45 pm GMT \n
@John Smith I must object.

Socialism does re-distribute the meager wealth of the working class into the pockets of the non working class and state owned business in exchange for handouts designed to keep you dependent on a system that hates you. Socialism or communism pretend to be democracy OR they are in the end, the consumation of democratic path, the "people" governing itself.

The "people". Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Mao Cheng Ji , April 21, 2017 at 5:42 pm GMT \n
200 Words @Wizard of Oz Maybe you are oversimplifying tbe position you are arguing against. It is easy when discussing human nature to dismiss the idea that we have genes for respecting or being greedy for property rights but the way to look at it is different.

Start by considering what is objectively good for enjoyable human society, especially on a small scale, then consider what programming might be conducive to it. Just as it is a priori likely thst there would be some genetic programming to help us not to be fooled by liars the strong and reciprocal feeling for "mine" and "thine" needs programming that prevents taking no thought for the morrow and being fecklessly indifferent to people damaging the tools and other artefacts one has made.

punishment systems resulted in people minimizing effort

I don't quite understand your point here. So, you're against punishment? Or, more specifically, against punishing greed? So then, can I come over, take 'your' stuff, and walk away? I don't think so.

Okay, I guess what you're saying is that socioeconomic models utilizing, in some reasonable, orderly way, the concept of ownership lead to higher productivity, technological progress, and all that. Well, sure, empirically this has been the story so far. What's not clear to me is:
1. that productivity and technological progress are all that good and desirable. The Amish don't use electricity and they seem happy. And
2. that this is the universal rule for all times. Suppose a few decades from now all the reasonable necessities are produced by unmanned machines, in abundant quantities. I don't know, 3-D printers, or something. Do you still need to own stuff? When is enough enough? Read More

Daniel Chieh , April 21, 2017 at 5:45 pm GMT \n
@Joe Wong I would be very sceptical about any proof provided by the White to debunk anybody anything, historically the Whtie demonizes or badmouths others with fake news to make themselve superior. Orientalism and casting South American civilizations as bloodthirty barbarians are some of the ancient examples, phantom WMD and Maidan Square mob putsch are the recent examples. Yes, because whites are apparently a monolithic bloc dedicated to the suppression of everyone else, especially Sweden these days. Please.

良药苦口. China needed the lesson we received. Never forget the price of weakness. That doesn't mean we should denigrate the achivements of anyone else. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

hyperbola , April 21, 2017 at 8:56 pm GMT \n
@Daniel Chieh No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away - it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people - the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system. Already Adam Smith warned us that the system sold to us as "competitive capitalism" has nothing to do with reality. We have been suffering from "corrupt mercantilism" since at least then. It is no accident that our war for independence was fought against the jewish power family monopolies of the "city of london" and their corrupt (government "licensed") East India Co.
Exactly how do you imagine your"competitive" system is going to get started (sometime) and then be maintained? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Wizard of Oz , April 22, 2017 at 12:20 am GMT \n
@Mao Cheng Ji

punishment systems resulted in people minimizing effort
I don't quite understand your point here. So, you're against punishment? Or, more specifically, against punishing greed? So then, can I come over, take 'your' stuff, and walk away? I don't think so.

Okay, I guess what you're saying is that socioeconomic models utilizing, in some reasonable, orderly way, the concept of ownership lead to higher productivity, technological progress, and all that. Well, sure, empirically this has been the story so far. What's not clear to me is:
1. that productivity and technological progress are all that good and desirable. The Amish don't use electricity and they seem happy. And
2. that this is the universal rule for all times. Suppose a few decades from now all the reasonable necessities are produced by unmanned machines, in abundant quantities. I don't know, 3-D printers, or something. Do you still need to own stuff? When is enough enough? You confused me a bit because the opening quote was not mine but Daniel Chieh's. Had I time I would gladly follow you and J.M Keynes in dreaming intelligently of the prospects for our grandchildren. Keynes in 1930 seemed to imagine a world in which everyone could share his refined tastes. Now we would with at least equal realism consider making available genetic engineering on a large scale .

[Apr 19, 2017] Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

Apr 19, 2017 | economistsview.typepad.com
anne , April 17, 2017 at 05:55 AM
http://cepr.net/blogs/beat-the-press/paul-krugman-gets-retail-wrong-they-are-not-very-good-jobs

April 17, 2017

Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

Paul Krugman used his column * this morning to ask why we don't pay as much attention to the loss of jobs in retail as we do to jobs lost in mining and manufacturing. His answer is that in large part the former jobs tend to be more white and male than the latter. While this is true, although African Americans have historically been over-represented in manufacturing, there is another simpler explanation: retail jobs tend to not be very good jobs.

The basic story is that jobs in mining and manufacturing tend to offer higher pay and are far more likely to come with health care and pension benefits than retail jobs. A worker who loses a job in these sectors is unlikely to find a comparable job elsewhere. In retail, the odds are that a person who loses a job will be able to find one with similar pay and benefits.

A quick look at average weekly wages ** can make this point. In mining the average weekly wage is $1,450, in manufacturing it is $1,070, by comparison in retail it is just $555. It is worth mentioning that much of this difference is in hours worked, not the hourly pay. There is nothing wrong with working shorter workweeks (in fact, I think it is a very good idea), but for those who need a 40 hour plus workweek to make ends meet, a 30-hour a week job will not fit the bill.

This difference in job quality is apparent in the difference in separation rates by industry. (This is the percentage of workers who lose or leave their job every month.) It was 2.4 percent for the most recent month in manufacturing. By comparison, it was 4.7 percent in retail, almost twice as high. (It was 5.2 percent in mining and logging. My guess is that this is driven by logging, but I will leave that one for folks who know the industry better.)

Anyhow, it shouldn't be a mystery that we tend to be more concerned about the loss of good jobs than the loss of jobs that are not very good. If we want to ask a deeper question, as to why retail jobs are not very good, then the demographics almost certainly play a big role.

Since only a small segment of the workforce is going to be employed in manufacturing regardless of what we do on trade (even the Baker dream policy will add at most 2 million jobs), we should be focused on making retail and other service sector jobs good jobs. The full agenda for making this transformation is a long one (higher minimum wages and unions would be a big part of the picture, along with universal health care insurance and a national pension system), but there is one immediate item on the agenda.

All right minded people should be yelling about the Federal Reserve Board's interest rate hikes. The point of these hikes is to slow the economy and reduce the rate of job creation. The Fed's concern is that the labor market is getting too tight. In a tighter labor market workers, especially those at the bottom of the pecking order, are able to get larger wage increases. The Fed is ostensibly worried that this can lead to higher inflation, which can get us to a wage price spiral like we saw in the 70s.

As I and others have argued, *** there is little basis for thinking that we are anywhere close to a 1970s type inflation, with inflation consistently running below the Fed's 2.0 percent target, (which many of us think is too low anyhow). I'd love to see Krugman pushing the cause of full employment here. We should call out racism and sexism where we see it, but this is a case where there is a concrete policy that can do something to address it. Come on Paul, we need your voice.

* https://www.nytimes.com/2017/04/17/opinion/why-dont-all-jobs-matter.html

** https://www.bls.gov/news.release/empsit.t19.htm

*** http://cepr.net/blogs/beat-the-press/overall-and-core-cpi-fall-in-march

-- Dean Baker

Fred C. Dobbs -> anne... , April 17, 2017 at 06:17 AM
PK: Consider what has happened to department stores. Even as Mr. Trump was boasting about saving a few hundred jobs in manufacturing here and there, Macy's announced plans to close 68 stores and lay off 10,000 workers. Sears, another iconic institution, has expressed "substantial doubt" about its ability to stay in business.

Overall, department stores employ a third fewer people now than they did in 2001. That's half a million traditional jobs gone - about eighteen times as many jobs as were lost in coal mining over the same period.

And retailing isn't the only service industry that has been hit hard by changing technology. Another prime example is newspaper publishing, where employment has declined by 270,000, almost two-thirds of the work force, since 2000. ...

(To those that had them, they were probably
pretty decent jobs, albeit much less 'gritty'
than mining or manufacturing.)

BenIsNotYoda -> anne... , April 17, 2017 at 06:42 AM
Dean is correct. Krugman just wants to play the racism card or tell people those who wish their communities were gutted that they are stupid.
JohnH -> BenIsNotYoda... , April 17, 2017 at 06:48 AM
Elite experts are totally flummoxed...how can they pontificate solutions when they are clueless?

Roger Cohen had a very long piece about France and it discontents in the Times Sunday Review yesterday. He could not make heads or tails of the problem. Not worth the read.
https://www.nytimes.com/2017/04/14/opinion/sunday/france-in-the-end-of-days.html?rref=collection%2Fcolumn%2Froger-cohen&action=click&contentCollection=opinion&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=collection&_r=0

And experts wonder why nobody listens to them any more? Priceless!!!

BenIsNotYoda -> JohnH... , April 17, 2017 at 07:34 AM
clueless experts/academics. well said.
paine -> anne... , April 17, 2017 at 08:27 AM
Exactly dean
Tom aka Rusty -> anne... , April 17, 2017 at 07:39 AM
Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

Sort of a Larry Summers with a little better manners.

anne -> Tom aka Rusty... , April 17, 2017 at 08:18 AM
Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

[ This is a harsh but fair criticism, and even the apology of Paul Krugman was conditional and showed no thought to the other workers insulted. ]

cm -> Tom aka Rusty... , April 17, 2017 at 08:11 AM
There is a lot of elitism to go around. People will be much more reluctant to express publicly the same as in private (or pseudonymously on the internet?). But looking down on other people and their work is pretty widespread (and in either case there is a lot of assumption about the nature of the work and the personal attributes of the people doing it - usually of a derogatory type in both cases).

I find it plausible that Krugman was referring those widespread stereotypes about job categories that (traditionally?) have not required a college degree, or have been relatively at the low end of the esteem scale in a given industry (e.g. in "tech" and manufacturing, QA/testing related work).

It must be possible to comment on such stereotypes, but there is of course always the risk of being thought to hold them oneself, or indeed being complicit in perpetuating them.

As a thought experiment, I suggest reviewing what you yourself think about occupations not held by yourself, good friends, and family members and acquaintainces you like/respect (these qualifications are deliberate). For example, you seem to think not very highly of maids.

Of course, being an RN requires significantly more training than being a maid, and not just once when you start in your career. But at some level of abstraction, anybody who does work where their autonomy is quite limited (i.e. they are not setting objectives at any level of the organization) is "just a worker". That's the very stereotype we are discussing, isn't it?

anne -> cm... , April 17, 2017 at 08:26 AM
Nicely explained.
paine -> anne... , April 17, 2017 at 08:40 AM
Yes
anne -> Tom aka Rusty... , April 17, 2017 at 08:24 AM
Krugman thinks nurses are the equivalent of maids...

[ The problem is that Paul Krugman dismissed the work of nurses and maids and gardeners as "menial." I find no evidence that Krugman understands that even after conditionally apologizing to nurses. ]

paine -> anne... , April 17, 2017 at 08:42 AM
Even if there are millions of mcjobs
out there
none are filled by mcpeople

[Apr 17, 2017] If you put the two trends together-increased individual income inequality and increased corporate savings-what were witnessing then is increasing private control over the social surplus

Notable quotes:
"... Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares. ..."
"... Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control. ..."
Apr 17, 2017 | economistsview.typepad.com
RGC , April 16, 2017 at 07:23 AM
Why is it anyone would want to save such an economic system?

April 11, 2017

from David Ruccio

"If you put the two trends together-increased individual income inequality and increased corporate savings -- what we're witnessing then is increasing private control over the social surplus.

Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

Why is it anyone would want to save such an economic system?"

https://rwer.wordpress.com/2017/04/11/why-is-it-anyone-would-want-to-save-such-an-economic-system/#more-28993

[ Tie that to the private banking system ]

anne -> RGC... , April 16, 2017 at 07:40 AM
Possibly I do not understand the matter, but I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse.
RGC -> anne... , April 16, 2017 at 07:50 AM
http://voxeu.org/article/global-corporate-saving-glut
anne -> RGC... , April 16, 2017 at 08:00 AM
https://fred.stlouisfed.org/graph/?g=dnZ6

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1948-2016

* Undistributed profits

https://fred.stlouisfed.org/graph/?g=dnYR

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1980-2016

* Undistributed profits

anne -> anne... , April 16, 2017 at 06:12 PM
Again, I was and am right.

I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse:

https://fred.stlouisfed.org/graph/?g=dnZ6

anne -> RGC... , April 16, 2017 at 08:03 AM
http://voxeu.org/article/global-corporate-saving-glut

April 5, 2017

The global corporate saving glut: Long-term evidence

By Peter Chen, Loukas Karabarbounis, and Brent Neiman

Corporate saving has increased relative to GDP and corporate investment across the world over the past three decades, reflecting how the global decline in the labour has led to increased corporate profits. This column characterises these trends using national income accounts and firm-level data, and relates them to firm characteristics and the accumulation of financial assets. In response to declines in the components of the cost of capital, a model with capital market imperfections generates an increase in corporate saving similar to that found in the data.

[ I am grateful for the reference, but I had already read the paper carefully and found no reason to agree with the assertion that there is long term evidence of a corporate saving glut. ]

RGC -> anne... , April 16, 2017 at 02:55 PM

2.2 National Accounts Structure and Identities

National accounts data include sector accounts that divide the economy into the corporate sector, the government sector, and the household and non-profit sector.

For most economies, the corporate sector can be further disaggregated into financial and non-financial corporations and the household sector can be distinguished from the non-profit sector.

National accounts data also include industry accounts that divide activity according to the International Standard Industrial
Classification, Rev. 4 (SIC).

A set of accounting identities that hold in the aggregate as well as at the sector or industry
level serve as the backbone for the national accounts.

In these accounts, the value of final
production (i.e. production net of intermediate goods) is called gross value added (GVA). When
aggregated to the economy level, GVA equals GDP less net taxes on products. GVA is detailed
in the generation of income account and equals the sum of income paid to capital, labor, and
taxes:


GVA = Gross Operating Surplus (GOS) + Compensation to Labor
+ Net Taxes on Production.


GOS captures the income available to corporations and other producing entities after paying for labor services and after subtracting taxes (and adding subsidies) associated with production.


The distribution of income account splits GOS into gross saving, dividends, and other payments to capital such as taxes on profits, interest payments, reinvested foreign earnings, and other transfers:


GOS = Gross Saving (GS) + Net Dividends | {z } Accounting Profits
+ Taxes on Profits + Interest
− Reinvested Earnings on Foreign Direct Investment + Other Transfers.


Net dividends equal dividends paid less dividends received from subsidiaries or partially-owned entities. Other transfers include social contributions and rental payments on land.

In our analyses, we define (accounting) profits as the sum of gross saving and net dividends.


The capital account connects the flow of saving to the flow of investment as follows:

GS = Net Lending + Gross Fixed Capital Formation + Changes in Inventories + Changes in Other Non-Financial Produced Assets.

The net lending position is defined as the excess of gross saving over investment spending.

https://minneapolisfed.org/research/wp/wp736.pdf

RGC -> RGC... , April 16, 2017 at 03:22 PM
GOS = Gross Saving (GS) + Net Dividends + Taxes on Profits + Interest − Reinvested Earnings on Foreign Direct Investment + Other Transfers.
reason -> RGC... , April 16, 2017 at 07:51 AM
"Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares."

Or in the case of say Bill Gates in deciding which causes get assistance and which not rather than people voting on it (not that I think Bill Gates is necessarily doing harm - but why should he get to decide?).

RC AKA Darryl, Ron -> reason... , April 16, 2017 at 09:33 AM
$democracy
RGC -> reason... , April 16, 2017 at 03:25 PM
Right. And private banks get to do it routinely.

[Apr 16, 2017] The most common characteristic of people running their own business was that theyd been fired twice

Notable quotes:
"... things might have worked out with better luck on timing), you need your head examined to start a small business ..."
"... If you can tolerate the BS, it is vastly better to be on a payroll. 90% of all new businesses fail and running one is no picnic. ..."
"... And new business formation has dived in the US, due mainly IMHO to less than robust demand in many sectors of the economy. ..."
"... You're so right. It used to be that there were set asides for small businesses but nowadays Federal and State Governments are only interested in contracts with large businesses. The SBA classification for small business is based on NAICS code (used to be SIC code) is usually $1-2 million or up to 500 employees. I wonder how they can be small businesses! ..."
"... To survive, small businesses need to sell their goods/services to large businesses. Most of the decision makers who purchase these items are unreachable or already have their favorites. Unless your small business has invented a better mousetrap you're SOL! ..."
Apr 16, 2017 | www.nakedcapitalism.com
Yves Smith, April 16, 2017 at 5:00 pm

As someone who has started three businesses, two of them successful (I went to Australia right before the Gulf War started, which led to new business in Sydney coming to a complete halt for six months; things might have worked out with better luck on timing), you need your head examined to start a small business. The most common characteristic of people running their own business was that they'd been fired twice.

If you can tolerate the BS, it is vastly better to be on a payroll. 90% of all new businesses fail and running one is no picnic.

And new business formation has dived in the US, due mainly IMHO to less than robust demand in many sectors of the economy.

steelhead , April 16, 2017 at 5:41 pm

Unless your family fully bankrolls you until BK kicks in (snark). I would have loved to write as a career. Unfortunately, at the time, promises that had been made were broken and I had to go to work for a F500 just to survive right after my undergraduate degree was completed. Fate and Karma.

oh , April 16, 2017 at 5:56 pm

You're so right. It used to be that there were set asides for small businesses but nowadays Federal and State Governments are only interested in contracts with large businesses. The SBA classification for small business is based on NAICS code (used to be SIC code) is usually $1-2 million or up to 500 employees. I wonder how they can be small businesses!

To survive, small businesses need to sell their goods/services to large businesses. Most of the decision makers who purchase these items are unreachable or already have their favorites. Unless your small business has invented a better mousetrap you're SOL!

[Apr 12, 2017] The Despair of Learning That Experience No Longer Matters

Apr 12, 2017 | economistsview.typepad.com
RGC , April 12, 2017 at 06:41 AM
The Despair of Learning That Experience No Longer Matters

By Benjamin Wallace-Wells April 10, 2017

.....................

The arguments about Case and Deaton's work have been an echo of the one that consumed so much of the primary campaign, and then the general election, and which is still unresolved: whether the fury of Donald Trump's supporters came from cultural and racial grievance or from economic plight. Case and Deaton's scholarship does not settle the question. As they write, more than once, "more work is needed."

But part of what Case and Deaton offer in their new paper is an emotional logic to an economic argument. If returns to experience are in decline, if wisdom no longer pays off, then that might help suggest why a group of mostly older people who are not, as a group, disadvantaged might become convinced that the country has taken a turn for the worse. It suggests why their grievances should so idealize the past, and why all the talk about coal miners and factories, jobs in which unions have codified returns to experience into the salary structure, might become such a fixation. Whatever comes from the deliberations over Case and Deaton's statistics, there is within their numbers an especially interesting story.

http://www.newyorker.com/news/benjamin-wallace-wells/the-despair-of-learning-that-experience-no-longer-matters

[Apr 12, 2017] Why losing your job leads to a very long-lasting decline in your lifetime wages

Apr 12, 2017 | lse.ac.uk
Gregor Jarosch (2015, Chicago, Stanford): Jarosch writes a model to explain why losing your job leads to a very long-lasting decline in your lifetime wages. His hypothesis is that this is due to people climbing a ladder of jobs that are increasingly secure, so that when one has the misfortune of losing a job, this leads to a fall down the ladder and a higher likelihood of having further spells of unemployment in the future. He uses administrative social security data to find some evidence for this hypothesis.

[Apr 11, 2017] Trump administration betrayed students depply in debt

Apr 11, 2017 | economistsview.typepad.com

im1dc April 11, 2017 at 04:48 PM SoE DeVos is dangerously stupid and incompetent

"DeVos's decision to reverse some of her work "with no coherent explanation or substitute" effectively means that the Trump administration is placing the welfare of loan contractors above those of student debtors"

https://www.bloomberg.com/news/articles/2017-04-11/devos-undoes-obama-student-loan-protections

"DeVos Undoes Obama Student Loan Protections"

'Trump's education secretary wants to limit costs at a time when more than 1 million Americans are annually defaulting'

by Shahien Nasiripour...April 11, 2017...2:46 PM EDT

"Education Secretary Betsy DeVos on Tuesday rolled back an Obama administration attempt to reform how student loan servicers collect debt.

Obama issued a pair (PDF) of memorandums (PDF) last year requiring that the government's Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt. But in a memorandum (PDF) to the department's student aid office, DeVos formally withdrew the Obama memos.

The previous administration's approach, DeVos said, was inconsistent and full of shortcomings. She didn't detail how the moves fell short, and her spokesmen, Jim Bradshaw and Matthew Frendewey, didn't respond to requests for comment.

DeVos's move comes a week after one of the student loan industry's main lobbies asked for Congress's help in delaying or substantially changing the Education Department's loan servicing plans. In a pair of April 4 letters to leaders of the House and Senate appropriations committees, the National Council of Higher Education Resources said there were too many unanswered questions, including whether the Obama administration's approach would be unnecessarily expensive.

A recent epidemic of student loan defaults and what authorities describe as systematic mistreatment of borrowers prompted the Obama administration, in its waning days, to force the FSA office to emphasize how debtors are treated, rather than maximize the amount of cash they can stump up to meet their obligations.

Obama's team also sought to reduce the possibility that new contracts would be given to companies that mislead or otherwise harm debtors. The current round of contracts will terminate in 2019, and among three finalists for a new contract is Navient Corp. In January, state attorneys general in Illinois and Washington, along with the U.S. Consumer Financial Protection Bureau, or CFPB, sued Navient over allegations the company abused borrowers by taking shortcuts to boost its own bottom line. Navient has denied the allegations.

The withdrawal of the Obama administration guidelines could make Navient a more likely contender for that contract, government officials said. Navient shares moved higher after the government released DeVos's decision around 11:30 a.m. New York time. Navient stock ended up almost 2 percent.

The Obama administration vision for how federal loans would be serviced almost certainly meant the feds would have to increase how much they pay loan contractors to collect monthly payments from borrowers and counsel them on repayment options. Already, the government annually spends around $800 million to collect on almost $1.1 trillion of debt. DeVos, however, made clear that her department would focus on curbing costs.

"We must create a student loan servicing environment that provides the highest quality customer service and increases accountability and transparency for all borrowers, while also limiting the cost to taxpayers," DeVos said.

With her memo, DeVos has taken control of the complex and widely derided system in which the federal government collects monthly payments from tens of millions of Americans with government-owned student loans. The CFPB said in 2015 that the manner in which student loans are collected has been marred by "widespread failures."

DeVos's move "will certainly increase the likelihood of default," said David Bergeron, a senior fellow at the Center for American Progress, a Washington think tank with close ties to Democrats. Bergeron worked under Democratic and Republican administrations over more than 30 years at the Education Department. He retired as the head of postsecondary education.

During Obama's eight years in office, some 8.7 million Americans defaulted on their student loans, for a rate of one default roughly every 29 seconds.

Former Deputy Treasury Secretary Sarah Bloom Raskin worked on student loan policy during the latter years of the Obama administration, in part over concern that borrowers' struggles were affecting the management of U.S. debt. DeVos's decision to reverse some of her work "with no coherent explanation or substitute" effectively means that the Trump administration is placing the welfare of loan contractors above those of student debtors, she said.

In a statement Tuesday, Illinois Attorney General Lisa Madigan, who is suing Navient, agreed: "The Department of Education has decided it does not need to protect student loan borrowers."
libezkova -> im1dc... , April 11, 2017 at 05:24 PM

Thank you ! A very good finding.

[Apr 11, 2017] Legacy systems written in COBOL that depends on a shrinking pool of aging programmers to baby

Notable quotes:
"... Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style, some did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time blip. ..."
"... In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned. At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's KPMG and EY helping. ..."
"... My personal favourite is Accenture / British Gas . But then you've also got the masterclass in cockups Raytheon / U.K. Border Agency . Or for sheer breadth of failure, there's the IT Programme That Helped Kill a Whole Bank Stone Dead ( Infosys / Co-op ). ..."
"... I am an assembler expert. I have never seen a job advertised, but a I did not look very hard. Send me your work!!! IBM mainframe assembler ..."
"... What about Computer Associates? For quite a while they proudly maintained the worst reputation amongst all of those consultancy/outsourcing firms. ..."
"... My old boss used to say – a good programmer can learn a new language and be productive in it in in space of weeks (and this was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language. ..."
"... The huge shortcoming of COBOL is that there are no equivalent of editing programs. ..."
"... Original programmers rarely wrote handbooks ..."
"... That is not to say that it is impossible to move off legacy platforms ..."
"... Wherefore are ye startup godz ..."
Apr 11, 2017 | www.nakedcapitalism.com
After we've been writing about the problem of the ticking time bomb of bank legacy systems written in COBOL that depends on a shrinking pool of aging programmers to baby them for now nearly two years, Reuters reports on the issue. Chuck L flagged a Reuters story, Banks scramble to fix old systems as IT 'cowboys' ride into sunset, which made some of the points we've been making but frustratingly missed other key elements.

Here's what Reuters confirmed:

Banks and the Federal government are running mission-critical core systems on COBOL, and only a small number of older software engineers have the expertise to keep the systems running . From the article:

In the United States, the financial sector, major corporations and parts of the federal government still largely rely on it because it underpins powerful systems that were built in the 70s or 80s and never fully replaced

Experienced COBOL programmers can earn more than $100 an hour when they get called in to patch up glitches, rewrite coding manuals or make new systems work with old.

For their customers such expenses pale in comparison with what it would cost to replace the old systems altogether, not to mention the risks involved.

Here's what Reuters missed:

Why young coders are not learning COBOL . Why, in an era when IT grads find it hard to get entry-level jobs in the US, are young programmers not learning COBOL as a guaranteed meal ticket? Basically, it's completely uncool and extremely tedious to work with by modern standards. Given how narrowminded employers are, if you get good at COBOL, I woudl bet it's assumed you are only capable of doing grunt coding and would never get into the circles to work on the fantasy of getting rich by developing a hip app.

I'm sure expert readers will flag other issues, but the huge shortcoming of COBOL is that there are no equivalent of editing programs. Every line of code in a routine must be inspected and changed line by line.

How banks got in this mess in the first place. The original sin of software development is failure to document the code. In fairness, the Reuters story does allude to the issue:

But COBOL veterans say it takes more than just knowing the language itself. COBOL-based systems vary widely and original programmers rarely wrote handbooks, making trouble-shooting difficult for others.

What this does not make quite clear is that given the lack of documentation, it will always be cheaper and lower risk to have someone who is familiar with the code baby it, best of all the guy who originally wrote it. And that means any time you bring someone in, they are going to have to sort out not just the code that might be causing fits and starts, but the considerable interdependencies that have developed over time. As the article notes:

"It is immensely complex," said [former chief executive of Barclays PLC Anthony] Jenkins, who now heads startup 10x Future Technologies, which sells new IT infrastructure to banks. "Legacy systems from different generations are layered and often heavily intertwined."

I had the derivatives trading firm O'Connor & Associates as a client in the early 1990s. It was widely recognized as being one of the two best IT shops in all of Wall Street at the time. O'Connor was running the biggest private sector Unix network in the world back then. And IT was seen as critical to the firm's success; half of O'Connor's expenses went to it.

Even with it being a huge expense, and the my client, the CIO, repeatedly telling his partners that documenting the code would save 20% over the life of the software, his pleas fell on deaf ears. Even with the big commitment to building software, the trading desk heads felt it was already taking too long to get their apps into production. Speed of deployment was more important to them than cost or long-term considerations. 1 And if you saw this sort of behavior with a firm where software development was a huge expense for partners who were spending their own money, it's not hard to see how managers in a firm where the developers were much less important and management was fixated on short term earnings targets to blow off tradeoff like this entirely.

Picking up sales patter from vendors, Reuters is over-stating banks' ability to address this issue . Here is what Reuters would have you believe:

The industry appears to be reaching an inflection point, though. In the United States, banks are slowly shifting toward newer languages taking cue from overseas rivals who have already made the switch-over.

Commonwealth Bank of Australia, for instance, replaced its core banking platform in 2012 with the help of Accenture and software company SAP SE. The job ultimately took five years and cost more than 1 billion Australian dollars ($749.9 million).

Accenture is also working with software vendor Temenos Group AG to help Swedish bank Nordea make a similar transition by 2020. IBM is also setting itself up to profit from the changes, despite its defense of COBOL's relevance. It recently acquired EzSource, a company that helps programmers figure out how old COBOL programs work.

The conundrum is the more new routines banks pile on top of legacy systems, the more difficult a transition becomes. So delay only makes matters worse. Yet the incentives of everyone outside the IT areas is to hope they can ride it out and make the legacy system time bomb their successor's problem.

If you read carefully, Commonwealth is the only success story so far. And it's vastly less complex than that of many US players. First, it has roughly A$990 billion or $740 billion in assets now. While that makes it #46 in the world (and Nordea is of similar size at #44 as of June 30, 2016), JP Morgan and Bank of America are three times larger. Second, and perhaps more important, they are the product of more bank mergers. Commonwealth has acquired only four banks since the computer era. Third, many of the larger banks are major capital markets players, meaning their transaction volume relative to their asset base and product complexit is also vastly greater than for a Commonwealth. Finally, it is not impossible that as a government owned bank prior to 1990 that not being profit driven, Commonwealth's software jockeys might have documented some of the COBOL, making a transition less fraught.

Add to that that the Commonwealth project was clearly a "big IT project". Anything over $500 million comfortably falls into that category. The failure rate on big IT projects is over 50%; some experts estimate it at 80% (costly failures are disguised as well as possible; some big IT projects going off the rails are terminated early).

Mind you, that is not to say that it is impossible to move off legacy platforms. The issue is the time and cost (as well as risk). One reader, I believe Brooklyn Bridge, recounted a prototypical conversation with management in which it became clear that the cost of a migration would be three times a behemoth bank's total profit for three years. That immediately shut down the manager's interest.

Estimates like that don't factor in the high odds of overruns. And even if it is too high for some banks by a factor of five, that's still too big for most to stomach until they are forced to. So the question then becomes: can they whack off enough increments of the problem to make it digestible from a cost and risk perspective? But the flip side is that the easier parts to isolate and migrate are likely not to be the most urgent to address.

____
1 The CIO had been the head index trader and had also help build O'Connor's FX derivatives trading business, so he was well aware of the tradeoff between trading a new instrument sooner versus software life cycle costs. He was convinced his partners were being short-sighted even over the near term and had some analyses to bolster that view. So this was the not empire-building or special pleading. This was an effort at prudent management.

Clive , April 11, 2017 at 5:51 am

I got to the bit which said:

Accenture is also working with software vendor Temenos Group AG to help

and promptly splurted my coffee over my desk. "Help" is the last thing either of these two ne'redowells will be doing.

Apart from the problems ably explained in the above piece, I'm tempted to think industry PR and management gullibility to it are the two biggest risks.

Marina Bart , April 11, 2017 at 6:06 am

As someone who used to do PR for that industry (worked with Accenture, among others), I concur that those are real risks.

skippy , April 11, 2017 at 6:07 am

Heaps of IT upgrades have gone a bit wonky over here of late, Health care payroll, ATO, Centerlink, Census, all assisted by private software vendors and consultants – after – drum roll .. PR management did a "efficiency" drive [by].

Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style, some did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time blip.

disheveled . nice self licking icecream cone thingy and its still all gov fault . two'fer

Colonel Smithers , April 11, 2017 at 7:40 am

Thank you, Skippy.

It's the same in the UK as Clive knows and can add.

In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned. At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's KPMG and EY helping.

What I have read / heard is that the external consultants often cost more and will take longer to do the work than internal bidders. The banks and government(s) run an internal market and invite bids.

Clive , April 11, 2017 at 9:33 am

Oh, where to start!

My personal favourite is Accenture / British Gas . But then you've also got the masterclass in cockups Raytheon / U.K. Border Agency . Or for sheer breadth of failure, there's the IT Programme That Helped Kill a Whole Bank Stone Dead ( Infosys / Co-op ).

They keep writing books on how to avoid this sort of thing. Strangely enough, none of them ever tell CEOs or CIOs to pay people decent wages, not treat them like crap and to train up new recruits now and again. And also fail to highlight that though you might like to believe you can go into the streets in Mumbai, Manila or Shenzhen waving a dollar bill and have dozens of experienced, skilled and loyal developers run to you like a cat smelling catnip, that may only be your wishful thinking.

Just wait 'til we get started trying to implement Brexit

Raj , April 11, 2017 at 12:10 pm

Oh man, if you only had a look at the kind of graduates Infosys hires en masse and the state of graduate programmers coming out of universities here in India you'd be amazed how we still haven't had massive hacks. And now the government, so confident in the Indian IT industry's ability to make big IT systems is pushing for the universal ID system(aadhar) to be made mandatory for even booking flight tickets!

So would you recommend graduates do learn COBOL to get good jobs there in the USA?

Clive , April 11, 2017 at 12:22 pm

I'd pick something really obscure, like maybe MUMPS - yes, incredibly niche but that's the point, you can corner a market. You might not get oodles of work but what you do get you can charge the earth for. Getting real-world experience is tricky though.

Another alternative, a little more mainstream is assembler. But that is hideous. You deserve every penny if you can learn that and be productive in it.

visitor , April 11, 2017 at 1:36 pm

Is anybody still using Pick? Or RPG?

Regarding assembler: tricky, as the knowledge is tied to specific processors - and Intel, AMD and ARM keep churning new products.

Synoia , April 11, 2017 at 3:40 pm

I am an assembler expert. I have never seen a job advertised, but a I did not look very hard. Send me your work!!! IBM mainframe assembler

visitor ,