Monday, December 21, 2015

Lawrence Wittner — Has the Time Come for Democratization of the Economy?

A study released at the beginning of December by the Institute for Policy Studies (IPS) reported that America’s 20 wealthiest individuals own more wealth than roughly half the American population combined—152 million people. The startling level of economic inequality in the United States is also highlighted by Forbes, which recently observed that the richest 400 Americans possess more wealth than 62 percent of the American public—192 million people. Furthermore, these studies apparently underestimate the concentration of wealth in the United States, for the use of offshore tax havens and legal trusts conceals trillions of dollars that the richest Americans have amassed for themselves and their families…
In the 1970s, America’s wealthiest 0.1 percent—the richest one-thousandth of the population—owned 7 percent of U.S. household wealth. Today, that figure has risen to 20 percent—about as much wealth as is possessed, in total, by the bottom 90 percent of Americans.
Although the 20 richest Americans, who possess more wealth than about half the American population combined, include some founders of corporations, they are outnumbered by the heirs of families with vast fortunes. The latter individuals include Charles and David Koch (the scions of a wealthy founder of the John Birch Society, with $82 billion between them) and four members of Wal-Mart’s Walton clan (with $127.6 billion among them).
All right, you might say; but does this economic inequality really matter? Well, it certainly matters to those Americans whose economic opportunities have been stunted to facilitate this accumulation and hoarding of vast wealth. Furthermore, as the authors of the IPS study note: “Extreme inequalities of income, wealth and opportunity undermine democracy, social cohesion, economic stability, social mobility, and many other important aspects of our personal and public lives.” In addition, “extreme inequality corrodes our democratic system and public trust. It leads to a breakdown in civic cohesion and social solidarity, which in turn leads to worsened health outcomes. Inequality undercuts social mobility—and has disastrous effects on the economy.”
Inequality of income and wealth is another of the paradoxes of liberalism.

Has the Time Come for Democratization of the Economy?
Lawrence Wittner


Random said...

What if the *voters* are corrupt. Has that ever crossed your mind? (I'm not saying hte elite are not against working people too.)

The lynch mob are the middle and upper middle classes, especially middle aged and older property owning women; they are afraid and worried of everything and want every possible threat from “nasty” men to be met with disproportionate force, because in any case they don’t care about dusky/swarthy male nobodies.

Their principle are “better safe than sorry” and “safe at any cost (to someone else)”.

This is an article from the Financial Times from some years that shows the mindset:
«But is clear leaders of both parties lack the confidence to challenge the mood of xenophobia that exists outside Washington. Instead they are fuelling it. In some respects the Democrats are now as guilty of stoking fears on national security as the Republicans. Their logic is impeccable. A majority of Americans believe there will be another large terrorist attack on American soil.
Such is the depth of anxiety that one-fifth or more of Americans believe they will personally be victims of a future terrorist attack. This number has not budged in the last four and a half years.”»
«Mr Bush has consistently received a much higher public trust rating on the war on terror than the Democrats.
Without this — and without the constant manipulation of yellow and orange terror alert warnings at key moments in the political narrative — Mr Bush would almost certainly have lost the presidential race to John Kerry in 2004.»
«In other words, the Democrats have found an effective way of neutralising their most persistent electoral liability: they are out-Bushing Mr Bush.
It is easy to see why key Democrats, including Hillary Clinton, have adopted this strategy. It is easy also to see why their Republican counterparts are following suit. As Peter King, the Republican representative for New York, said last week: “We are not going to allow the Democrats get to the right of us on this issue.” This left Mr Bush holding the candle for the left, as it were.»

The middle classes have re-elected thumpingly the congresspeople and presidents who have done renditions, torture, PATRIOT act mass spying, assassination, civilian massacres, TARP, three-strikes, etc. etc.; there is a strong demand for “gloves off” policies from the authoritarian or fascist leaning middle classes.

Random said...

Let me add some historical parallel: Dixie voters overwhelmingly supported the war for slavery, and went enthusiastically to die for slavery in their hundreds of thousands, and many kept determinedly fighting for it even after military defeat and ruin.

The Slavery War was not created solely by nominal “representatives” who really are bribed and mostly not subject to electoral discipline. (even if there is evidence that a plurality if not a majority of Dixie whites were not in favour of the war).

There is a mean, vicious, petty aspect of USA culture (e.g. plague blankets sent to the Indians in winter to clear out land for speculation), a “WINNERS do whatever it takes, and good riddance the losers” culture, and it has become more popular (also I think thanks to Ayn Rand concentrated delivery of it in her writings).

That the powers-that-be can override the will of voters and democracy (“electoral discipline”) is not working is one of the most enduring myths that progressive love to delude themselves with.

The policies of the last 15 years since Gingrich’s Contract On America (and Reagan’s Involution before that) are very popular indeed, and REAL AMERICAN voters have endorsed them enthusiastically.

Do you think that Republican and Blue Dog Senators are thinking “oh sure bubbles/PATRIOT/Iraq/TARP/… are very unpopular, but I vote for them even if it is going to cost my re-election?”.

Voters are not babes in the wood, misled by the MSM and unable to change their corrupt, authoritarian representatives.

They very corrupt, authoritarian themselves; the key figure is that 70% of voters (those who actually vote) are rentiers, petty landlords, and the percentage of retired or middle aged voters about to retire is much higher than it useed to be (and IIRC campaign donors are 100% middle aged/pensioner petty rentiers).

The majority of voters are only extraordinarily pleased by policies that create bubbles that result in huge tax free capital gains for them, and by policies that reduce wages and employment driving down the costs of what they buy with those capital gains. They also want more repression, more wars, more brutality against suspects, safety at any cost (any cost to brown or dark skinned nobodies).

As Grover Norquist has been boasting, the strategy of turning the middle class into petty rentiers has created a permanent conservative and authoritarian voter culture, and the triangulating or Blue Dog democrats (or New Labour in the UK) have learned that to win electorally they must pander to those voters first and foremost.

During the New Deal, welfare (and unions and worker rights) was carefully designed to exclude many if not most blacks, and the irish/italian/… working classes were the main beneficiaries.

Then in the 1960-1970s the irish/italian/… working class begun to feel they had made it and were fully vested, and that their wealth (houses in the suburbs with white picket fences for example) were being threatened by the scummy underclass of pillaging and burgling dark skinned crowds, and were easily persuaded that their class interests as nouveau rentiers were aligned with those of the truly wealthy, that they were being exploited extortion ate taxation to the benefit of laughing dark skinned welfare queens and strapping young bucks, and they voted to cut severely the social insurance programmes and political structures that had made their lives better. They got what they wished for…

Random said...

I think I have an even deeper root cause.

“Conservative” parties are always those that boost the interests of insiders (incumbents). Which insiders are dominant varies with time. It could be large landowners, or owners of businesses, or members of a bureaucratic “nomenklatura”, or executives of large companies,
Currently in first-world “conservative” parties in anglo-american culture countries like the Republicans in the USA the dominant category of insiders (incumbents) are those that are insiders to *leverage*, and profit from higher levels of leverage by using it for margin based speculation on properties and for asset stripping.

An even deeper root cause may be the reason why the leverage insiders are dominant: I suspect because a lot of the middle class regard themselves as leverage insiders, as they speculate on margin on real estate, and profit from asset stripping (including of their own assets…). Home equity extraction…

There may be a twist here: there seems to be to me a significant correlation between first-past-the-post voting systems and the dominance of leverage insiders in politics.

I think this can be explained by:

* Voters have largely spontaneously (or not) gerrymandered themselves, by going to live with people of similar income; for example by moving to suburbs that did not evolve organically like cities, but were designed to appeal to specific income segments.

* This and first-past-the-post has meant that a lot of districts have become safe for one party or the other, and has given much more weight to the voters in marginal districts, and in particular to middle class voters that vote their “books” and those are loaded with leveraged asset speculation.

Let us have a look at the UK :)

Cutting £53/week benefits to "Northern scroungers" is very popular in the South East, it is seen as "value for money" and "sound management of the economy" as much as giving hundreds of billions of subsidies to the City and subsidising property sellers by giving subsidies to property buyers with "Help To Buy".

As to giving a handout, a "leg up", to Tory pensioners (mostly in the South East: how many Northern pensioners have £10,000-£20,000 in cash in the bank?) with subsidized interest rates, I doubt anybody will resent the good fortune bestowed upon nice old ladies with a chunk of spare cash.

Voters hate handouts very selectively, usually depending on whether who gets them is "respectable" like themselves and whether they are direct cash handouts. In this case the Tory pensioner ladies, they are not the poor ones who cannot buy bonds, but the relatively rich respectable ones who will "invest" their savings. Who can be against a "leg up" for rich savers? :-)

As to lack of resentment about some handouts, Thatcher was worried about it for Right-To-Buy:
Thatcher was worried that Conservative voters who had paid in full for their houses would be annoyed if council tenants were able to buy at a discount: “What will they say on my Wates estates?” she asked. But she was prevailed upon to swallow this objection.»
«"The tenants will have the right to purchase their homes at a price one third below market value. [ ... ] a duty on every council to sell homes on these terms – giving their tenants what amounts to a 100 per cent mortgage with no deposit.”

Actually almost nobody objected to this massive handout.

I suspect that most voters have considerable cognitive biases as to what they consider redistribution at their personal expense and what they don't realize is the same thing just thinly disguised.

Random said...

It is instructive to compare violence and gentrification.

B Schneier, a wise (computer, but not just) security expert argued that the best security-enhancing strategy is gentrification.

Intelligent people are bound to realize that exploitation rather than cooperation also works, that is violence works, as over a thousand years of feudalism (the protection racket by another name) in Europe demonstrated, but it has high volatility.

Gentrification is less volatile.

Violence works pretty well for the winners. Crime, even violent crime, usually pays if done without utter stupidity. The problem with that is the volatility. Few winners, many losers, and winner one day, in a coffin the next.

In what sense did the exploitative system of feudalism "work"?

First of all it has endured in some variations for arguably 12 centuries or more. Not much else has. If it did not work in some fundamental sense it wouldn't have lasted so long and adapted so much to circumstances. That's a burkean style argument, and indeed in a perverse way that's how Burke was making an apology of the feudal system.

Also it has worked very well for the winners. Many extended families have lived in splendid luxury for over a thousand years on the proceeds of the protection racket. We'll see whether the families of the Mozillos, ONeils, Fulds, Caynes, and other "heroes of wealth creation" in our late stage decaying asset stripping crony financialism will last that long.

Again the problem with winning by violence is not average winnings; it is the volatility in the very skewed distribution of winnings, and for the winners the high volatility across time. It is like the protection rackets in every time and place: a "winner takes all" system, where "all" includes the lives of the losers, and every winner is constantly fighting some pretenders. Reading medieval cronicles in particular is like reading the stories of any gangster war, and in effect most wars in Europe until the 19th century were gangster wars.

Matt Franko said...

This is still coming from the "money comes from rich people!" pov...

peterc said...

@ Random. Very interesting thoughts.

Ignacio said...

Random that's pretty good, although the mainstream 'conservatives' and 'progressives' are pretty much the same from an economic PoV.

We can se a return to traditional class struggle from the youth though, maybe there is hope, as the youth is the most supportive of people like Sanders or Corbyn. Far away from your typical euro-communist parties of the 60's, but all things considered radical anti-establishment.

OFC the youth are the big losers of the current system and do not believe in "american dream", "capitalism" or "free markets". Here in Spain in the elections last Sunday the youth are the voters of the independent or non-establishment parties, which have been now eroded to 50% of all votes and will keep getting worse.

Unfortunately it may take a decade or more so all the old people dies and the status quo gets crushed by reality, but is true that the 'rentier'/ownership dynamic dictates the politics much and what economic cohort people forms part of have a heavy weight on their politics.

With around 40% of the most politically active part of the population being the enablers and neoliberals themselves, they yield a lot of political power on the actual outcomes (more than the 0.1%). This cohort is reactionary and will turn onto fascism to protect their interests throwing everyone else under the bus.

Our problem is not the lack of aggregate demand, but the lack of aggregate/collective intelligence if you will...

Tom Hickey said...

Sociologists call aggregate/collective intelligence "collective consciousness." A low level of collective consciousness results in social dysfunction owing to lack of solidarity. Liberal economics tends to ignore the significance of solidarity in its adoption of methodological individualism. The consequence is homo economicus being a stick figure. Sociology corrects that erroneous assumption by pointing out the societal effects of hyper-individualism that also have economic impact.

Durkheim’s Collective Consciousness

In The Division of Labor in Society, Emile Durkheim introduces a concept that has become a cornerstone of sociological vocabulary, collective consciousness. Durkheim introduces this phrase as a label for “the totality of beliefs and sentiments common to the average members of a society” (Durkheim 39). It is through a collective consciousness that the division of labor, the main focus of Durkheim’s writing, is understood and passed from generation to generation for it is the collective consciousness that “links successive generations to one another” (Durkheim 39). It is this collective consciousness that ensures that certain societal norms and constructs, such as the division of labor, live on even as individuals within the society pass on. It is in this sense that the collective consciousness has “a life of its own” (Durkheim 39). While Hegel’s monastery arguably lost its purpose as the circumstances that called for its creation were altered, the collective consciousness transcends time and change.

Durkheim is careful to distinguish the collective consciousness from the consciousness of individuals. He recognizes both as distinct but notes that the collective consciousness is realized in individuals. Durkheim describes this notion as “two consciousnesses exist within us: the one comprises only states that are personal to each one of us, characteristic of us as individuals, whilst the other comprises states that are common to the whole of society”(Durkheim 61).

Just as the collective consciousness “is diffused across society as a whole” (Durkheim 39) providing certain solidarity by spreading common beliefs, the division of labor also inspires certain solidarity. Durkheim believed the division of labor’s “true function is to create between two or more people a feeling of solidarity” (Durkheim 17). While Marx adopted a negative perception of the division of labor, Durkheim casts it in a more positive light, as a way of agglutinating members of society for “it is through the division of labor…that the cohesion of societies would be ensured” (Durkheim 23).

CLASSICS OF SOCIOLOGICAL THEORY — Sociology 221 – Fall 2010 – Dhiraj Murthy

Random said...

Tom there is MASSIVE amounts of money involved are GIGANTIC… My usual “money shot” quote:
«In 2001, the average price of a house was
£121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330»
That’s an average between the North and the South, and it does not really apply to the North.

But even it taking it as it is, that means £12,000 a year for a decade of tax-free effort-free income for a working class family in the South earning around £16,000 after tax.
£12,000 (likely more) a year of tax-free effort-free windfall is GIGANTIC, especially if it recurs every year for 10 years as per the above numbers; and actually it has been going on for 20-30 years. And for the millions of people with a house in London it has been even bigger than in the rest of the South.

Do people here really realize what an extra £12,000 a year of (purely redistributive rentier) windfall going on for decades can mean on top of an earned after tax income of £16,000? For millions if not a dozen million families?

Do readers here realize what that means to “aspirational” Southern voters and what they are prepared to vote for to keep it coming?

Also that these people are “right-wing” is not quite right, those voters are rather socialist and left-wing when it comes to their own civil rights and their own incomes, just like the traders and executives in the City and in business. They want a big-state for me, but a small-state for thee. They are ferociously right-wing when it comes to the civil rights and incomes of “scroungers” and “nasties”, Northerners and men.
Also because a large chunk of South East property owning middle aged and older landladies are baby boomers who grew very "liberated" during the 60-70s and a lot of them got rid of their husbands one or more times. They are both Thatcherite and “socially/sexually liberal”, so not a mixed situation.

Relevantly Cameron owes a large part of his being leader of the Conservatives to his targeting that constituency. For example, why ever did he work so hard for the rights of homosexuals, despite the reluctance of his party? They are a small minority of voters. I guess that it was a dog whistle to liberated, socially progressive but economically and politically conservative baby boomer landladies.

Random said...

"Random that's pretty good, although the mainstream 'conservatives' and 'progressives' are pretty much the same from an economic PoV."

The parties that carry the label of the "left" have ideas, and they have been actionable, and the main ones have been:

* Push up asset valuations and balloon debt collateralized by assets via very loose regulatory and credit policy.

* Push down wages and benefits for working age people via smashing of unions and unionized industries, effective abolition of the right to strike, and massive immigration of a reserve army of workers.

These are the same actionable ideas that the rightist parties have.

Because the reason is the same: that's what "Blow you, I am allright Jack" asset owning swing voters in the South East want, and both parties want to win elections.

Having ideas that make you unelectable is not what parties of the left or right want to boast about.

As I have said before:

Since the "idea" of pushing up asset prices via the debt-collateral spiral is uncontroversial, right and left parties differ only as to the zeal with which they pursue the other idea, to push down wages and welfare and up unemployment and insecurity.

The "the recreation of Jane Austen's world" is very popular indeed with voters, as they think that each of them would be "ladies of quality" or "squires" in that world.

Thus "a Left agenda" that makes the parties of the Left electable is not at all "adopting the opposites of these things", but adopting them directly, as New Labour did, but then complementing them with less harsh poor laws than the parties of the Right have adopted.

Put in historical terms, both parties of the Left and Right that want to be elected have as their agenda "the recreation of Jane Austen's world", but the Left supports the Speehhamland system of Poor Laws, the Right demands the 1834 system of poor low workhouses.

Thus for example Brown's introduction of the very important earned income tax credit system, and conversely Osborne's introduction of requirements for unpaid work while getting unemployment benefit.

That's what the Left and Right debate is all about currently: going back to "Jane Austen's world" for sure, but with the Speenhamland poor laws or the 1834 poor law.

Such are the "new" ideas in UK (and USA, Australian, New Zealand) politics :-).

Random said...

"OFC the youth are the big losers of the current system and do not believe in "american dream", "capitalism" or "free markets". Here in Spain in the elections last Sunday the youth are the voters of the independent or non-establishment parties, which have been now eroded to 50% of all votes and will keep getting worse."

Speaking as a pauper while I work and wait for something better of the 21st century I’d sooner be a casualty of Speenhamlandism under Labour, than "collateral damage" by Tory sponsored poor laws that are being beefed-up using age old divide and rule along with today’s understandings of human psychology.
And you....

Random said...

Perhaps the "aspirational" affluent voters of the South East could be persuaded that instead of aspiring to an "upstairs" lifestyle thanks to ballooning property prices and zooming rents on their micro-manors, they could aspire to have safer, better paid jobs and more security and freedom to choose a better job with good unemployment insurance, and better pensions when they retire.

But that is a difficult sell, because their experience is that an investment of £10,000 cash as a deposit for leveraged government guaranteed South East property speculation has generated gross returns of £15,000 *per year* with net profits of over half that, thanks to massive redistribution from the lower classes and Northern losers.

There is no way that honest, fairer, less redistributive policies could generate that much after tax profit for the Southern middle class landlords who aspire to "upstairs"-like affluence thanks to huge mostly tax-free entirely redistributive capital gains on assets, and they feel entitled to so much more:

«As the middle classes book holidays in Torquay rather than Tuscany, drink tap water instead of San Pellegrino and put the conservatory they had been planning to build on hold, they start to question the amount they have to pay to the Government.»

A better strategy is as Tom has said putting people and the environment ahead as priorities. But I doubt it will work.

Random said...

"A low level of collective consciousness results in social dysfunction owing to lack of solidarity. "

Delusional. These people have a *very high* «level of collective consciousness« it is just it is not "left wing". It is the «solidarity« of property owners.

Random said...

I suggest everyone here read Peter's post:

"On the left, it sometimes feels as if we spend a lot of time in a losing battle. When the general population rejects or shows little interest in our latest set of progressive proposals and votes for political candidates even more right wing than the last, it’s common to engage in a little hand wringing, accuse ourselves of having failed to devise or effectively articulate a practical vision, and go back to the drawing board wondering how we can do things better next time. Meanwhile, the general population continues along a well trodden path of embracing war, environmental destruction, extreme inequality, mass unemployment and mean-spirited attacks on the poor along with policies tinged with racist or nationalistic overtones.

There is perhaps an inclination to interpret such developments as the ill informed choices of individuals who would choose otherwise if only they were not deceived into voting against their own interests. Or, alternatively, it might seem that people, rather than being deceived, feel powerless to effect change, and so don’t attempt it in large enough numbers. Personally, I typically adopt as a working assumption one or other of those interpretations. But sometimes – just sometimes – I wonder whether each of these is largely illusory. The unpleasant thought occurs that maybe it is not a matter of the majority misunderstanding what is, and has been, going on, but rather the majority largely getting what it wants and the left having priorities and values that are almost completely at odds with the rest of society."

Ignacio said...

Random the model cannot continue, hence the politics will change radically over the next years (my comment from the youth). The internal contradictions of capitalism have reached a point where they will have to be solved by massive changes in politics and policies like in the 30's. The recent past was result of manufactured inflation due to oil shocks and a power play by certain countries, supported by bankers and financiers and incompetent authorities back then. The current trend is mostly deflationary and the bias is too strong, they won't be able to do anything: wage suppression, decreasing population (in developed and the most important developing nations like China) and a general apathy against the system, reducing consumption, increasing ecological problems, etc.

The model is doomed and if we fail to adapt to the circumstances the current system will collapse and we will enter a new 'dark ages'. It's a matter of when not if IMO. The "tulip" model pushed in urban centres around the world is doomed to fail, they are inneficient blackholes of resources importing slave labour from developing nations and parasitically consuming resources with no real output at all. We keep inventing bullshit jobs and building up a disheartening life style most of the population deep inside dislikes, and the closer you are into one of those urban black holes the more true this is.

It's very possible the demand for MMT-type policies will come from the same cohort pushing now for neoliberal policies because to keep the system rolling there won't be any other way, it will be the last chance to save the system before radical change. At that point (even now we already may be) there may be no way back because the the 'every man for himself' and social darwinist model it's too deep ingrained into the popular psyche or those who hold power. But as I said, I've faith because I don't think this is true with at least a big part of the youth, so we may get actual real positive progressive outcomes from it if we face real problems instead of fictional problems made up from an appeal to primitive reptilian desires.

If we don't then things will turn very ugly eventually.

Tom Hickey said...

What is happening globally is that the developed world is competing against the emerging world, which is what austerity to increase "competitiveness" is really about.

The emerging world is destined to win this competition because incentives. The standard of living is improving dramatically in the emerging world, while it is falling in the developed world and will fall dramatically when the next crisis hits.

Ignacio said...

There is just too much kool-aid and media manipulation out there and the belief in the establishment is yet too strong in certain places. It's good to have perspective depending on where you stand, believe me that the feeling is not the same in countries where there is an outrageous official unemployment and 90% of the population does not believe the media or the government bullshit. Even in USA, poll after poll you see the population in to the far-left of the policies on most issues, most of the time. But the real political activists which hold power is the neoliberal part of the population (a lot of whom ofc support "left" parties like Democrats or New Labour).

If these policies and life style were truly welcome the self-exterminating ex-middle class in USA wouldn't have entered such a destructive spiral as it has, which is rather pathetic from an outsider point of view tbh. It's completely dystopian, that through corporate manipulation of marketing, the traditional white middle class society has decided to self-destruct eroding all sort of social safety nets, significant support networks, institutional support, etc. and exchange all that from unhealthy life-styles, over-medication and trash poisonous culture. Not only this but immigrants after being assimilated into the culture suffer from the same social diseases and are completely weak compared to their ancestors. Is a completely weak, nihilistic and pathetic culture with no taste for life or willingness to fight back over organization that has built in and promoted by corrupt and greedy human beings not worth the air they breath. This is what you egt when you promote garbage like Ayn Rand or "there is no such thing as society" along radical individualism.

It's obvious to me why reactionary traditionalists and conservative movements would arise in opposition to the nihilists in the urban capitals (although they themselves are nihilistic and destructive for a different set of reasons) in some places in USA.

Ignacio said...

What is happening globally is that the developed world is competing against the emerging world, which is what austerity to increase "competitiveness" is really about.

The emerging world is destined to win this competition because incentives. The standard of living is improving dramatically in the emerging world, while it is falling in the developed world and will fall dramatically when the next crisis hits.

But not from a real pov: the export-zombie nations of the EMU have a huge trade surplus, the biggest trade surplues the world have ever seen, ever, and are importing inflation from the rest of the world in order to fix their own manufactured problems. There is no real "competitiveness" problem, exports on aggregate are at record high. And in UK or USA they are less and less worth any real production with their bubblenomics as balance of trade imbalances grow with deflation setting in Europe or China slowing down, so not really trying to compete.

There is not a real competition of resources (commodities worth less and less), it's just a focus on illusory problems of manufacture monetary scarcity that promotes all this misguided policies and ideologies. China is doing their own thing (as we can see from Matt post they will be boosting public spending massively, probably the morons in the West will have their minds blown up by this move).