“Robots And Robber Barons”: Profits Continue To Rise At The Expense Of Workers
The American economy is still, by most measures, deeply depressed. But corporate profits are at a record high. How is that possible? It’s simple: profits have surged as a share of national income, while wages and other labor compensation are down. The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense.
Wait — are we really back to talking about capital versus labor? Isn’t that an old-fashioned, almost Marxist sort of discussion, out of date in our modern information economy? Well, that’s what many people thought; for the past generation discussions of inequality have focused overwhelmingly not on capital versus labor but on distributional issues between workers, either on the gap between more- and less-educated workers or on the soaring incomes of a handful of superstars in finance and other fields. But that may be yesterday’s story.
More specifically, while it’s true that the finance guys are still making out like bandits — in part because, as we now know, some of them actually are bandits — the wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then. Indeed, recent college graduates had stagnant incomes even before the financial crisis struck. Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.
Why is this happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.
About the robots: there’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots, so cheap Asian labor is no longer a reason to produce them abroad.
In a recent book, “Race Against the Machine,” M.I.T.’s Erik Brynjolfsson and Andrew McAfee argue that similar stories are playing out in many fields, including services like translation and legal research. What’s striking about their examples is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn’t limited to menial workers.
Still, can innovation and progress really hurt large numbers of workers, maybe even workers in general? I often encounter assertions that this can’t happen. But the truth is that it can, and serious economists have been aware of this possibility for almost two centuries. The early-19th-century economist David Ricardo is best known for the theory of comparative advantage, which makes the case for free trade; but the same 1817 book in which he presented that theory also included a chapter on how the new, capital-intensive technologies of the Industrial Revolution could actually make workers worse off, at least for a while — which modern scholarship suggests may indeed have happened for several decades.
What about robber barons? We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.
I don’t know how much of the devaluation of labor either technology or monopoly explains, in part because there has been so little discussion of what’s going on. I think it’s fair to say that the shift of income from labor to capital has not yet made it into our national discourse.
Yet that shift is happening — and it has major implications. For example, there is a big, lavishly financed push to reduce corporate tax rates; is this really what we want to be doing at a time when profits are surging at workers’ expense? Or what about the push to reduce or eliminate inheritance taxes; if we’re moving back to a world in which financial capital, not skill or education, determines income, do we really want to make it even easier to inherit wealth?
As I said, this is a discussion that has barely begun — but it’s time to get started, before the robots and the robber barons turn our society into something unrecognizable.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 9, 2012
“Heritage Diagnosed, Severe DeMintia”: On The Far, Far Outer Reaches Of The Conservative Movement
For nigh on forty years, the American Enterprise Institute and the Heritage Foundation have been doing a good-cop/bad-cop routine—make that a bad-cop/really bad-cop routine. Yesterday, Heritage decided to double down on bad, with stained-glass windows.
Up until now, the Heritage Foundation has done a fairly competent job of disguising itself as a “think tank” where sobersided “scholars” write unreadable “policy papers” with “executive summaries.” But by appointing Senator Jim DeMint, Republican of South Carolina, as its new president, Heritage risks “rebranding” itself as a full-bore, revival-tent, Jesus-saves belief tank of the Christianist right.
DeMint inhabits the outer reaches of movement conservatism pretty much across the board, but his greatest passion seems to be reserved for what are delicately termed “social issues.” On questions of sexual identity and behavior, he is a forthright bigot and a prude. Shortly before the 2008 election, speaking at a Dominionist “Greater Freedom Rally,” he summarized his position thusly:
If someone is openly homosexual, they shouldn’t be teaching in the classroom. And he holds the same position as an unmarried woman who’s sleeping with her boyfriend. She shouldn’t be in the classroom.
Last year, he indicated that his belief in small government is rooted in the theory that there is a fixed and limited amount of space that can be occupied by the government and the deity combined. The size of the public sector and the size of the Almighty are inversely proportional to each other. It’s an iron law, a zero-sum game:
I’ve said it often and I believe it—the bigger government gets, the smaller God gets.
DeMint appears to believe that there is a similarly inverse, zero-sum relationship between science and Christianity. He is a notorious global-warming denialist and creationist. And he is an enemy of the very idea of public education. At the “Greater Freedom Rally,” he explained why:
The thing that we’ve conceded as a people that we’ve got to fix, is turning the education of our children over to the government…. Let ’em go to a school where they can learn that God created this earth—because we know he did. Scientists more and more are—are being trapped or backed into this whole idea. As they see the whole genome experience, experiment, or they research all the DNA, they realize that this had to be created. It could not have happened by accident. It’s impossible. So we can go out with confidence that we are created, we are given unalienable rights, and God has blessed this country beyond anything we could have imagined. And he’s put us in charge of this vineyard we call America.
DeMint’s garbled reference to genomes and DNA, by the way, was apparently a confused allusion to Francis Collins, the former director of the National Center for Human Genome Research, whom President Obama appointed to head the National Institutes of Health. Collins is an evangelical Christian, but, like all reputable scientists, he rejects creationism, including its “intelligent design” variation, and does not believe that global warming is a hoax engineered by liberal scientists motivated by a fanatical ideological preference for government regulation of private business.
The big Washington story of the moment is the battle between conservative Republicans and very conservative Republicans over whether or not to hold the economy hostage in order to prevent marginal income-tax rates on the top two per cent from reverting to the slight higher Clinton-era levels. A parallel story over the next few years may be the quiet struggle between A.E.I. and Heritage for Republican hearts and minds. A.E.I. may have the advantage when it comes to minds, but Heritage is where the hearts are. Heritage was founded in the first place because the older organization was considered too squishy. Even so, badthink has sometimes crept in. It was Heritage, you may recall, that invented the “individual mandate” that became the basis of Obamacare and, earlier, Romneycare. DeMint is unlikely to tolerate any such outbreaks of left deviationism at Heritage. Under him, its grip on the organ of G.O.P. emotion can only strengthen. Its grip on the organ of reason, such as it is, is apt to fare less well.
By: Hendrik Hertzberg, The New Yorker, December 7, 2012
“Hostage Takers, Act II”: GOP To Hold Debt Ceiling Hostage Again As Leverage For Medicare Cuts
On Sunday, Sen. Bob Corker (R-TN) conceded that Democrats have won the debate on raising taxes on the richest Americans and said that he would likely vote to increase rates on the top 2 percent of Americans in order to shift the debate to cutting entitlement programs and improve the GOP’s leverage in the debate over how to avert the so-called fiscal cliff.
During an appearance on Fox News Sunday, Corker explained that if Republicans “give Obama a 2 percent increase,” the party can then hold the debt ceiling hostage in order to secure real cuts in spending:
CORKER: The Republicans know they have the debt ceiling, that is coming up around the corner, and, the leverage is going to shift, as soon as we get beyond this issue. The leverage is going to shift, to our side where hopefully we’ll do the same thing we did last time and that is if the president wants to raise the debt limit by $2 trillion we get $2 trillion in spending reduction and, hopefully, this time, it is mostly oriented towards entitlement and with no process. […]
[Obama] has the upper hand on taxes and you have to pass something to keep it from happening. We only have one body. If we were to pass, for instance, raising the top 2 rates, and that’s it, all of a sudden we do have the leverage of the debt ceiling and we haven’t given that up so the only way the debt ceiling.
House Speaker John Boehner (R-OH) has indicated that the GOP plans to use that leverage by demanding more spending cuts, but the move will result in great economic costs. In 2011, Republican demands nearly led to a credit default and ultimately cost taxpayers “$18.9 billion over 10 years, due to elevated interest rates between January and August 2011.”
Obama slammed the GOP’s strategy during a meeting with business leaders last week. “The thinking is the Republicans will have more leverage because there will be another vote on the debt ceiling, and we will try to extract more concessions with a stronger hand on the debt ceiling,” Obama told members of the Business Roundtable. “That is a bad strategy for America, it’s a bad strategy for your businesses, and it is not a game that I will play.”
By: Igor Volsky, Think Progress, December 9, 2012
“The Forgotten Millions”: Spending More To Create Jobs Now Would Actually Improve Our Long-Run Fiscal Position
Let’s get one thing straight: America is not facing a fiscal crisis. It is, however, still very much experiencing a job crisis.
It’s easy to get confused about the fiscal thing, since everyone’s talking about the “fiscal cliff.” Indeed, one recent poll suggests that a large plurality of the public believes that the budget deficit will go up if we go off that cliff.
In fact, of course, it’s just the opposite: The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.
Moreover, despite years of warnings from the usual suspects about the dangers of deficits and debt, our government can borrow at incredibly low interest rates — interest rates on inflation-protected U.S. bonds are actually negative, so investors are paying our government to make use of their money. And don’t tell me that markets may suddenly turn on us. Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.
Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.
Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.
When you see numbers like those, bear in mind that we’re looking at millions of human tragedies: at individuals and families whose lives are falling apart because they can’t find work, at savings consumed, homes lost and dreams destroyed. And the longer this goes on, the bigger the tragedy.
There are also huge dollars-and-cents costs to our unmet jobs crisis. When willing workers endure forced idleness society as a whole suffers from the waste of their efforts and talents. The Congressional Budget Office estimates that what we are actually producing falls short of what we could and should be producing by around 6 percent of G.D.P., or $900 billion a year.
Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.
So what can be done? The panic over the fiscal cliff has been revelatory. It shows that even the deficit scolds are closet Keynesians. That is, they believe that right now spending cuts and tax hikes would destroy jobs; it’s impossible to make that claim while denying that temporary spending increases and tax cuts would create jobs. Yes, our still-depressed economy needs more fiscal stimulus.
And, to his credit, President Obama did include a modest amount of stimulus in his initial budget offer; the White House, at least, hasn’t completely forgotten about the unemployed. Unfortunately, almost nobody expects those stimulus plans to be included in whatever deal is eventually reached.
So why aren’t we helping the unemployed? It’s not because we can’t afford it. Given those ultralow borrowing costs, plus the damage unemployment is doing to our economy and hence to the tax base, you can make a pretty good case that spending more to create jobs now would actually improve our long-run fiscal position.
Nor, I think, is it really ideology. Even Republicans, when opposing cuts in defense spending, immediately start talking about how such cuts would destroy jobs — and I’m sorry, but weaponized Keynesianism, the assertion that government spending creates jobs, but only if it goes to the military, doesn’t make sense.
No, in the end it’s hard to avoid concluding that it’s about class. Influential people in Washington aren’t worried about losing their jobs; by and large they don’t even know anyone who’s unemployed. The plight of the unemployed simply doesn’t loom large in their minds — and, of course, the unemployed don’t hire lobbyists or make big campaign contributions.
So the unemployment crisis goes on and on, even though we have both the knowledge and the means to solve it. It’s a vast tragedy — and it’s also an outrage.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 6, 2012
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