Tuesday, May 26, 2015

Fuck the Job Count! What People Need Are Living Wages!

Every month the charade continues. Governments in North America announce the latest labour market statistics, hoping to pull the wool over the population’s eyes, making them believe that things are a lot better than they really are.

It’s relatively easy to do: just don’t count those who are so discouraged that they have given up looking for a job.  In reality, these people still exist; they just don’t show up in the unemployment figures.  As a result, people are spoon fed a distorted picture of reality that they seem more than happy to accept, unless, of course, they are struggling to make ends meet, which in America is more than 100 million people.
Related Posts
You don’t need to be a genius to see how the big lie works.  If the numbers are jigged to show less than a 10% unemployment rate, people will think that this means that 90% or more of the people who are employable do in fact have jobs.

It’s difficult to know in North America what the real unemployment rate is.  Estimates, based on the participation rate, those who are between 18-54 years old and do have jobs (see John Williams' site, Shadow Statistics) are closer to 23%.  In other words, three times the official, government endorsed, rate!

If that’s not enough, the government stats do not differentiate between part-time and full-time jobs, between temporary and permanent employment.  Having a permanent, full-time job with benefits that pays more the $50,000 is not the same as working part-time at Walmart, but for the purposes of propaganda they are.

What would make a difference is if we starting using the median income as an indicator of economic performance.  For example, U.S. real (inflation adjusted) median household income was $51, 939 in 2013 versus $51,759 in 2012, statistically unchanged.  In 2013, real median income was 8% lower than in 2007, the year before the onset of the Great Recession.  What’s up with that?

Things are about to get worse.  The U.S. Congress, otherwise known as America’s elected millionaires club, has just given the President of the United States of America, Mr. “Forget About Change You Can Believe In“ Barak Obama, the authority to fast track trade negotiations for the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership, which effectively will make it easier for multinational corporations to offshore production where salaries are the cheapest and where the environmental regulations are the most lax.

This recent development reminds of the lyrics of Bruce Springsteen’s poignant classic, “My Hometown” released in 1984 on the Born In The U.S.A album, a precursor for what was coming down the road:

Now Main Street’s whitewashed windows and vacant stores

Seems like there ain’t nobody wants to come down here no more

They’re closing down the textile mill across the railroad tracks

Foreman says these jobs are going boys and they ain’t coming back to your hometown

Fortunately, there is push back and it’s coming from municipal government, the level of government closest to the people.  Last week, the municipal council of Los Angeles adopted a resolution that would see the minimum wage become $15 an hour by 2020, joining Seattle and San Francisco in the fight against poverty.  As could be expected, billionaire Warren Buffet went on record to say that that raising the minimum wage to a living wage was a bad idea.  Bad idea for whom Warren?  Fat-assed rentiers like yourself or for the children of parents who have two work at least two wage-slave jobs in order to house, clothe, and feed their kids?

What will be really interesting to see and very sad if it is indeed the case –of course, we won’t know beforehand since the wordings of the multinational trade agreements are being kept secret—is if a corporation can file a motion in the investor-state dispute settlement tribunal to roll back living wage legislation adopted at the state or municipal level.

That’s certainly not the kind of change people were hoping for!!!  

Tuesday, May 19, 2015

The Politics of Greed

Politics in North America often hides behind the veil of economic discourse.  Underneath the veil is the unmitigated pursuit of self-interest, the maximization of personal gain.  As humans, however, we are sensitive to questions of who gets what and for what reason.  We have an innate conception of what constitutes a fair share.  Those who insist on getting more than their fair share run the risk of meeting strong resistance from those whose pocket is being picked, from those who are receiving less than they deserve.

Historically, might gave the right to take what one wants.  In some countries it is still the case.  Fortunately, in most developed societies, however, the well-being of the people must be taken into consideration in the distribution of material wealth.  Indeed, it is the mark of a developed society to have some form of wealth distribution in order to counter the dire effects of being born into poverty.
Related Posts

I consider myself fortunate that I was born in North America during the period of shared prosperity that followed the end of the Second World War.  Although I was born into the working class, I had no problem making my way to university after having received a quality education in the public school system.  Tuition fees were nominal and I could fund my post-secondary studies without difficulty, simply by working during the summer months and on the weekends during the school year.  Working construction, I earned five times my tuition fees in only four months.

Years of neo-liberal politics have changed the equation.  For example, my step daughter graduated from a law school in Ontario with approximately $60, 000 of student loan debt.  I guess she won’t be starting a family anytime soon.

Certainly, the cost of post-secondary education is only one marker of how things have changed over the last forty years, but it is an important one since in North America, education is considered as the most important enabler that allows individuals to improve their lot. 

So how did we get here?  Did we just wake up one day and decide that we no longer could afford equal opportunity for the masses?

No, our politicians never came out and stated directly that we had no choice, that we had to deny hope for a brighter future for those less well off.  They couldn’t.  They would have been voted out of office.  Instead, they hoodwinked the public by making them believe that they were working on their behalf because their focus was to improve the economy.

If we think of the equitable distribution of wealth within a society as a zero-sum game, attempts to claim more wealth at the expense of others can be disguised by claims of intentions to grow the economy.  Essentially, the state of the economy becomes a red herring that throws the public off the scent that measures are about to be taken that will shift wealth from the working and middle classes to the upper class, for the most part, to the rentiers.  All that is required is plausibility and that’s when discussions about the economy become paramount.

For instance, during the last forty years in North America, we have been bombarded by supply-side economics.  According to the cant, lowering corporate tax rates as well for those in the upper tax brackets will free up the wealth necessary to reinvest in the real economy, leading to more economic growth, more jobs, higher wages, in other words, greater prosperity for the society.  Despite the economic data that shows otherwise, the story keeps getting told and for good reason.

The primary effect of lowering taxes for the rich is to increase their after tax income.  Our politicians have been very successful in reaching this goal.  Yet, the secondary effect of increasing prosperity for the society at large is not materializing.  No matter, since once the tax rates are lowered, the primary benefit remains for the rich, despite sluggish economic growth, a lack of jobs, and wage stagnation for those who were also supposed to benefit from the fiscal change.  Moreover, any proposal to increase tax rates to previous levels is successfully countered by claims that such measures would impair economic growth.

All the while wealth is being transferred to the top 1% of the population, our political masters maintain the image of being competent managers of the economy by making use of dubious statistics: the first being the Gross Domestic Product (GDP) and the second is the official unemployment rate, which both give the impression that economic conditions are quite good.  For example, GDP continues to grow in North America because of constant population growth.  GDP per capita would give a much better indication of economic performance, but is almost never used in the mainstream media.  Similarly, the rate of unemployment is kept artificially low simply by shrinking the size of the workforce: the long-term unemployed no longer appear in the data since they have been classified to be no longer actively searching for a job.  As a result of not counting a great number of potential workers in the calculation, the US has a very acceptable unemployment rate of 5.6%, yet the participation rate, those who are of working age and do have jobs, is at its lowest point since the late 1970s, only 62.8%.  In reality, some 93 million Americans of working age do not have jobs.  As could be expected, the participation rate is almost never mentioned in the mainstream media.

By now, it should also be obvious to everyone in our Internet enabled culture that commerce no longer respects national borders.  Today’s investor class is under no obligation to reinvest earnings back into the national economy.  No longer would anyone claim that what good for General Motors is good for America.  Instead, the golden boy of the American corporate world, Apple Inc., for example, the highest valued corporation on the planet, is registered in Ireland, assembles its products in China, and keeps its huge profits offshore. 

Finally, now that the recession is over and the economy is apparently set to take off for another cycle of robust growth, it appears that Corporate America couldn’t be bothered to reinvest its record profits back into the real economy. In fact, there is more money to be made by manipulating the value of the company’s shares through increasing dividends paid to shareholders and by buying back stock.  This year will be a record year for buybacks, an estimated trillion dollars from corporate earnings that won’t be reinvested anytime soon.  So much hype about unfettering the job makers when there is a dearth of productive investment that would benefit those who toil in the real economy.

Of course there are dissenting voices.  The progressive American economists like Joseph Stiglitz, Paul Krugman, and Robert Reich come to mind.  All three are quite vocal in their critiques of neo-liberalism and American economic policy.  Yet, their ideas fail to gain traction.  It is as if they are delusional in their optimism that things could somehow be different if only we got the economic policies right.

In my opinion, they fail to see beyond their professional loyalties and to see the primary function of economics in political debate.  In short, economics has been used and will continue to be used as a polemic against egalitarian politics.  Concerns about economic performance trump concerns about the quality of democracy. 

In the Realpolitik of the English speaking nations, there is no debate.  It is the “economy uber alles “, for it is the cornerstone of the politics of greed.   

Monday, May 4, 2015

Let's Put Politics Where It Belongs: The Political Economy

The advantage of being able to speak and read in several languages is that you get to see how different cultures divide up the world, a phenomenon commonly referred to as linguistic relativity.  No where is this more evident in discussion about the political economy.

In the English speaking world, the term "political economy" is rarely used.  It is as if the economy actually exists in the real world, imposing its assumptions, mathematical abstractions, and calculations so popular with mainstream economists upon an unsuspecting public regardless of the context of the particular cultural matrix in which they are used.  Indeed, real world deviations from the "laws" of supply and demand and market equilibrium are most often ignored.  Essentially, this conceptual construct is reified to take on a life of its own to then become the central focus of political debate: how to increase economic growth, how to lower unemployment -- and my favorite -- "let's not do anything that would harm the economy", completely forgetting that what is referred to as THE ECONOMY is nothing more than an aggregation of statistics, often jigged to give a much better picture of what is really happening in the households of real people.

The French have a wonderful expression for this manner of constructing a social reality, la pensee unique, in other words, the one and only way of thinking.  And although there is disagreement within the economic discourse in English-speaking countries on how to manipulate the macroeconomic levers of interest rates, the value of the currency, taxation, and the level of government intervention into the economic affairs of the nation, there is a overwhelming consensus that the greatest societal good is to promote robust economic growth.  As long as the economy is growing, it's all good.

Related Post

In my mind, this way of thinking in the English-speaking world is nothing more, nothing less, than the politics of greed.

First and foremost, the complexity of human behavior is reduced to the bizarre conception of homo economicus or "econs" for short.  Econs exist in a world of perfect information happily leading their lives in the pursuit of the rational maximization of self interest, a worldview common and fortunately limited to sociopaths and neoclassical economists.  It always amazes me that hundreds of millions of English speakers allow their societies be dominated by such a paltry conception of human nature.

But there is a reason to explain its ironclad grip on how politics functions in the English-speaking world.  If humans are simply conceived as being rational and obeying the prime directive of maximizing their self interest, the moral consequences of choice is almost completely eliminated from examination, thereby absolving the few who engage in fraudulent practices at the expense of the many.

In the immortal words of Gordon Gekko, one of the main characters in Oliver Stone's award winning film, Wall Street, "Greed is good", an affirmation of faith that I would push even further by saying that "Greed is God" in America.

However, the politics of greed are about to bring a second global economic crisis within a decade.  Simply put, although financial markets are at record highs as are the capital valuations of Corporate America, the real economy is still in recession: the median income in the US is still 6% lower than it was in 2000!  This time around the size of the crash will beyond the capacity of the world's central bankers to counteract. 

Six years of massive government stimulus and investment in the automobile sector, near zero interest rates, quantitative easing, and record corporate profits have failed to revive the comatose patient.  North America is already in recession and it is only a question of time before this cold hearted reality wreaks carnage once again in the financial markets. 

Who is holding the bad debt?  In a manner of months we will find out.  Moreover, the huge write down that pension funds will incur will call into question their continued solvability in their present form.

And that's when the shit will hit the fan!!!

Indebted Millennials, having seen their once bright future flushed away, along with tapped out Boomers, struggling to survive on reduced pension benefits, will finally wake up to the fact that most of the cash that could have been used for productive investment has been hoovered up by the top .01%  and now resides offshore beyond their reach.

Money can influence electoral results only as long as the electorate is apathetic.  Fear and anger are great motivators to get ordinary people marching again, and the fallout from the second great crash will do just that.  One hundred years later, a second progressive movement is about to arise in North America, but it will take really tough times to bring it about.

Once it begins to swell, the political discourse will change, not only in the English-speaking countries but globally as well.  Then, at long last, we will be able to speak about the political economy in North America as an important concept, not simply to be dismissed outright as a strange way of thinking.