“Suffering Under The Weight Of Inequality”: Reaching The Point That Endangers Growth Itself, And That Should Concern Everyone
A report released this week by an economist at the University of California, Berkeley, shows that income inequality in the U.S. economy is at a new high. As the economy struggles in the wake of the Great Recession, income inequality broke records going back nearly 100 years.
According to the study, incomes among the top one percent rose by 31.4 percent between 2009 and 2012, while incomes for everyone else grew just 0.4 percent. The top decile of earners in the economy now captures more than half the total income.
Predictably, the debate rages about fairness. Commentators on the left argue that this income distribution couldn’t possibly be fair to workers, while those on the right suggest that any distribution is inherently fair as long as all Americans have the opportunity to compete to make it to the top.
It is difficult to show that any particular distribution of income is the right place to draw the line between fair and unfair. Let’s leave that question to others and focus solely on the question of whether disparities of this magnitude help or hinder the economy as a whole.
Economists have shifted their position on this issue over time. At one point, most economists agreed that inequality probably helps the economy. Inequality spurs people to work harder. In addition, some inequality is needed to create a pool of concentrated wealth that can be invested to finance the early stages of economic development: harvesting timber, building factories and so on.
However, more recent research suggests that while some inequality is necessary, too much inequality undermines growth: The research shows that the U.S. economy is probably at or near the point where the negative effects of inequality outweigh the positive effects.
Now, inequality dampens growth in three ways:
- Wealthy people handle their money differently than the rest. They tend to save a much higher percentage of their incremental income, or invest it in fixed assets like vacation homes. These forms of saving and investment do not trickle down to create significant wage income for others. In contrast, incremental money that flows to the middle class and poor people gets spent much more quickly. It’s spent on food, clothing and basic products that are produced in factories and on farms by people who earn wages. Money that flows to the middle class and poor has a multiplier effect, rippling through the economy to create more jobs and income for others. As a result, a shift in income towards the top results in less overall demand.
- In a nation like ours, where higher education is expensive, greater inequality means that fewer people get the skills they need for well-paying jobs. But as World Bank economist Branko Milanovic writes, “now that human capital is scarcer than machines, widespread education has become the secret to growth.” Facing a less prepared workforce, companies shift research and advanced manufacturing facilities offshore, which further erodes economic growth. The shift increases the chance that the next Facebook will be founded in India or China. Some other country will reap the economic benefit that comes from hosting breakthrough innovation.
- Other factors beyond the hard costs of higher education are important as well, as inequality rises and class lines harden. Consider two children, both with the same innate potential for accomplishment, one born to a family in the top 1 percent and the other to a family in the bottom 20 percent. The first one will have parents who read to them as a pre-schooler, stimulating his or her brain. The second one, probably not. The first one will grow up surrounded by role models whose hard work brought them success; the second one will grow up surrounded by others whose hard work brought them barely-livable incomes. Is it any wonder that the two children will enter adult life with a different readiness to use their intellect, a different level of motivation and confidence and a different awareness of how to build a successful career?
Two economists, Andrew Berg and Jonathan D. Ostry of the International Monetary Fund, have quantified the impact of inequality on economic growth. In a 2011 article, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” they examined why some countries enjoy long years of steady economic growth while other countries see their growth trail off after only a few years.
Berg and Ostry found that income inequality is the single most important factor in determining which countries can keep their economies growing. For example, income distribution is more important than open trading arrangements, favorable exchange rates and the quality of the country’s political institutions.
Berg and Ostry go on to measure the extent to which economic growth falls as inequality rises. They gauge inequality using the GINI coefficient, which ranges for 0 – 100. At one extreme, a society where everyone earns exactly the same would have a GINI score of 0. At the other extreme, a society in which one person owned all the wealth would have a GINI score of 100. For economies with GINI below 45, growth can be robust, but once it crosses above roughly 45, growth slumps. The GINI of the U.S. economy is in the low 40’s currently, so we are dangerously close to the point of decline.
Inequality in the U.S. shows no sign of abating, even as the economy recovers. The decline of unions, the pace of globalization, the abundance of workers in many industries and changes in health care and taxes have combined to staunch the earning power of working Americans, even as the economy grows and productivity increases. There are few options, and none that are consistent with the political climate of the time. But the trend is reaching the point that endangers growth itself, and that should concern everyone, regardless of the size of your paycheck.
By: David Brodwin, U. S. News and World Report, September 12, 2013
“The Most Dangerous Negro”: Daring To Dream Differently And Imagining Something Better
The Rev. Dr. Martin Luther King Jr.’s “I Have a Dream” so disturbed the American power structure that the F.B.I. started spying on him in what The Washington Post called “one of its biggest surveillance operations in history.” The speech even moved the head of the agency’s domestic intelligence division to label King “the most dangerous Negro of the future in this nation from the standpoint of Communism, the Negro and national security.”
Of course, King wasn’t dangerous to the country but to the status quo. King demanded that America answer for her sins, that she be rustled from her waywardness, that she be true to herself and to the promise of her founding.
King was dangerous because he wouldn’t quietly accept — or allow a weary people to any longer quietly accept — what had been. He insisted that we all imagine — dream of — what could and must be.
That is not the mission of politicians. That is the mission of a movement’s Moses.
And those Moses figures are often born among the young who refuse to accept the conditions of their elders, who see injustice through innocent eyes.
King was just 34 years old in 1963.
As President Obama put it Wednesday:
“There’s a reason why so many who marched that day and in the days to come were young, for the young are unconstrained by habits of fear, unconstrained by the conventions of what is. They dared to dream different and to imagine something better. And I am convinced that same imagination, the same hunger of purpose serves in this generation.”
So now, America yearns for more of these young leaders, and in some ways it has found some, not just in the traditional civil rights struggle but also in the struggles to win L.G.B.T. rights and to maintain women’s reproductive rights.
Yet there remains a sort of cultural complacency in America. After young people took to the streets as part of the Arab Spring, many Americans, like myself, were left wondering what had become of American activism. When was the last time our young people felt so moved that they took to the streets to bring attention to an issue?
There were some glimmers of hope around Occupy Wall Street and the case of Trayvon Martin, but both movements have lost much of their steam, and neither produced a clear leader.
So as we rightfully commemorate the March on Washington and King’s speech, let us also pay particular attention to the content of that speech. King spoke of the “fierce urgency of now,” not the fierce urgency of nostalgia.
(I was struck by how old the speakers skewed this week during the commemorations.)
What is our fierce urgency? What is the present pressure? Who will be our King? What will be our cause?
There is a litany of issues that need our national attention and moral courage — mass incarceration, poverty, gun policy, voting rights, women’s access to health care, L.G.B.T. rights, educational equality, immigration reform.
And they’re all interrelated.
The same forces that fight to maintain or infringe on one area of equality generally have some kinship to the forces that fight another.
And yet, we speak in splinters. We don’t see the commonality of all these struggles and the common enemies to equality. And no leader has arisen to weave these threads together.
Martin Luther King was a preacher, not a politician. He applied pressure from outside the system, not from within it. And I’m convinced that both forms of pressure are necessary.
King’s staggering achievement is testament to what can be achieved by a man — or woman — possessed of clear conviction and rightly positioned on the side of justice and freedom. And it is a testament to the power of people united, physically gathering together so that they must be counted and considered, where they can no longer be ignored or written off.
There is a vacuum in the American body politic waiting to be filled by a young person of vision and courage, one not suckled to sleep by reality television and social media monotony.
The only question is who will that person be. Who will be this generation’s “most dangerous” American? The country is waiting.
By: Charles M. Blow, Op-Ed Columnist, The New York Times, August 28, 2013
“The Evil Bozo Creep Show”: Trump University And Clown School
There’s really nothing all that wrong with defining “success” as making an absolute buffoon of yourself. You get attention that way. You might even make money that way, especially if you convince people that being as much of an embarrassment as you are is, in fact, a good thing – and you can put them on TV so people can watch the spectacle unfold. And in our absurdly celebrity-obsessed culture, there’s enough blurriness to the line between famous and notorious that one can convince oneself they’re moral equivalents.
But they’re not. If you want to make an ass of yourself for fame and money, knock yourself out. But don’t expect to be taken seriously at the same time.
That lesson has escaped walking logo Donald Trump, whom we thought was spending all his time combing his thin hair over his forehead, putting his name on buildings in tacky bright lights and humiliating people on a recession-era TV show about getting a job. But Trump, it seems, was running something called Trump University. Who knew?
These are not, after all, two words that one would put next to each other, logically. But Trump runs some sort of seminar camp in which he charges people up to $35,000 to hear hand-picked speakers talk about how to do the “art” of the Trump real estate deal, according to a complaint by New York Attorney General Eric Schneiderman. It’s not an actual university – that is, it doesn’t award degrees. And even the dangling carrot of the institution – the hope of actually getting to meet The Donald – wasn’t realized by many students (or, “students”) who, Schneiderman said, had to settle for a photo of themselves next to a cardboard cutout of Trump.
To his credit, that’s not a bad metaphor for the whole “university” scheme. But it’s hardly fair to people who shelled out thousands and thousands of dollars, thinking they’d get rich. Said Schneiderman:
Trump University engaged in deception at every stage of consumers’ advancement through costly programs and caused real financial harm. Trump University, with Donald Trump’s knowledge and participation, relied on Trump’s name recognition and celebrity status to take advantage of consumers who believed in the Trump brand.
To be fair, there are other fake schools that collect high tuitions from desperate people who then can’t find jobs or make back the investment they made in their educations. Trump is a meaty target – something he surely knows, since he’s put a lot of effort into making himself one. And it’s entirely possible that Schneiderman, wanting a tiny piece of the media attention Trump courts 24/7, was drawing attention to a serious issue by going after the least serious “school” out there.
But Trump’s level of self-aggrandizement has reached stunning heights, as he now contends that the president of the United States himself is behind the sting. President Obama and Schneiderman met on a Thursday night. Could they have been talking about Democratic politics? A looming government shutdown and what it would mean for the economy? The impact of Obamacare in New York, where insurance premiums are expected to go way down? Nope, Trump insists. It all has to be about him – what else? Said Trump:
They meet on Thursday evening. I get sued by this A.G. Schneiderman, I get sued on Saturday at 1 o’clock. Think of it. What government agency in the history of this country has ever brought a suit on a Saturday? I never heard of such a thing.
Perhaps it will all be academic in the end – which is about as close to academics as his institute comes. But Trump University and Trump himself should cheer up. There’s always clown college.
By: Susan Milligan, U. S. News and World Report, August 27, 2013
“Rights, Obligations, And Ignorant Libertarians”: If You Define Yourself By A Philosophy, At Least Have An Idea Of What It Implies
Oh, Rand Paul. What are we going to do with you?
I’ll tell you in a moment what I’m referring to. But first: One of the principal functions parties serve is that they act as a heuristic, or cognitive shortcut, for voters. If you have to vote for someone to serve on your city council and you know nothing about the candidates, you can use party as a proxy and you’ll be right almost all the time. You can also look to your party to see where you should come down on issues. It doesn’t necessarily make you lazy; sometimes it’s just efficient to look to others with values similar to yours for cues about what policies are worthwhile. We can’t all be experts on everything. In a similar way, parties give people who run for office a set of policy positions they can adopt without having to know everything about anything a lawmaker might have to address.
But if you call yourself a libertarian, you’re saying that parties aren’t enough for you, even if you’re a Republican. Instead, you’re motivated by a philosophical perspective to which you’ve given some serious thought. Every libertarian in politics, including Rand Paul, presents themselves this way. They’re concerned with ideas. So if you’re going to define yourself by a philosophy, isn’t it incumbent upon you to at least have an idea of what that philosophy implies, and a grasp of some basic philosophical concepts—for instance, like what a right is—so that you can talk about them with some modicum of sense when they come up, as they inevitably will?
Apparently not. Here’s Paul in a new National Review article:
“There’s a philosophic debate which often gets me in trouble, you know, on whether health care’s a right or not,” Paul, in a red tie, white button-down shirt, and khakis, tells the students from the stage. “I think we as physicians have an obligation. As Christians, we have an obligation. . . . I really believe that, and it’s a deep-held belief,” he says of helping others.
“But I don’t think you have a right to my labor,” he continues. “You don’t have a right to anyone else’s labor. Food’s pretty important, do you have a right to the labor of the farmer?”
Paul then asks, rhetorically, if students have a right to food and water. “As humans, yeah, we do have an obligation to give people water, to give people food, to give people health care,” Paul muses. “But it’s not a right because once you conscript people and say, ‘Oh, it’s a right,’ then really you’re in charge, it’s servitude, you’re in charge of me and I’m supposed to do whatever you tell me to do. . . . It really shouldn’t be seen that way.”
Oh dear. Paul is obviously unaware of this, but saying that health care is a right doesn’t mean that doctors have to treat people without being paid, any more than saying that education is a right means that public school teachers have to work for free. Because we all agree that education is a right, we set up a system where every child can be educated, whether their families could afford to pay for it themselves or not. It doesn’t mean that any kid can walk up to a teacher in the street and say, “I command you to teach me trigonometry for free. Be at my house at 9 tomorrow. You must do this, because I have a right to education and that means I am in charge of you and you’re supposed to do whatever I tell you to do.”
All this talk of “servitude” and “conscription” is just baffling. The only way I can interpret it is that libertarianism is something Paul picked up from his dad, and it seems to go over well with Republicans when he mentions it, but he hasn’t spent any time thinking about it.
I don’t know if the 2016 Republican presidential contest is going to be quite the nincompoop parade that 2012 was. But I wouldn’t be surprised if Rand Paul presents himself as the candidate with the big ideas. Make of that what you will.
By: Paul Waldman, Contributing Editor, The American Prospect, August 27, 2013
“Moving Past The Awkwardness With Respect”: Learning To Talk About Harriet Tubman, Slavery And Racism
Slavery and race are awkward and uncomfortable subjects for many Americans. As a result, we often find awkward and uncomfortable ways to talk about them. That was my conclusion earlier this week when, as a means of debuting his new channel All Def Digital, hip-hop entrepreneur Russell Simmons posted a video parody titled, “Harriet Tubman’s Sex Tape.” In the video, the iconic “conductor” of the Underground Railroad is shown secretly recording sexual relations with her “Massa” in an attempt to blackmail him into allowing her to start her now famous freedom train. Almost as soon as it was released the three-minute video prompted a wave of condemnation and a Change.org petition. It wasn’t long before the NAACP asked Simmons to take it down. He offered an apology—”For all those I offended, I am sincerely sorry”—and removed the clip from his website.
Simmons’s satirical approach represents one extreme. (“I’m a very liberal person with thick skin,” he explained.) On the other is the trend of introducing children to slavery with traumatic role-playing exercises. For example, in 2008, a middle school social studies teacher in suburban New York, who is white, bound the hands and feet of two black girls and instructed them to crawl underneath a desk to simulate the conditions of a crowded slave ship. In 2011, an elementary school student in Ohio described himself as having been “humiliated” after he was forced to play the role of a slave at a mock slave auction and his white classmates were urged to degrade him during the exercise. That same year in Virginia, the Washington Post reported that a fourth grade teacher also held a mock slave auction in her class and that the white children took turns buying the black and mixed-race children.
It’s not just in school classrooms that this reality show approach to slavery is taking place. At Connor Prairie Interactive History Park in Indiana, the public is asked to pay $20 to “Come face-to-face with slave hunters, see fear and hope in the eyes of a fellow runaway and… experience life as a fugitive slave during your journey through one of the most compelling periods in Indiana’s history. “ 60% of the visitors to the park are school children. According to a 2009 article from the Organization of American Historians’ Magazine of American History by historian Carl Weinberg, white visitors to the park often say they are getting quite a lot out of the experience of the reenactment, but it is not uncommon for African American visitors to feel uncomfortable about fully immersing themselves in the experience. Is this really a surprise to anyone?
Just for a moment, imagine if the holocaust was taught by either of these methods—a satire of Anne Frank, for example, trading sexual favors, or a fourth grade class of children being separated into jews and gentiles with the latter leading the former off to their death. It is hard to visualize either of those things happening. Slavery is the most profound mistake this country has ever made—”the great and foul stain upon the North America Union,” as John Quincy Adams said. We need to learn how to move past the awkwardness and talk with each other about it respectfully before we can laugh about it or relive the experience.
By: Noliwe M. Rooks, Time Magazine, August 17, 2013
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