See, the 1% aren’t getting richer, so everyone just pipe down. Of course, if you look at a block of time longer than 6 years, things don’t look so good. For example, the median income of the top 1% being $147,500 in 1982 and $201,400 in 2010 (2010 constant dollars). But ultimately that’s not the troubling part. It’s the other part of the StatsCan release:
In 1982 the median income of the rest of us – the 99% – was $28,000.
In 2010 it had risen….to $28,400.
Time for more corporate tax cuts.
50 years of data. No cherry-picking here.
And to the #Occupiers – this comes from the New York Times. Yes, some of the mainstream media bashes you unfairly – but good reporters still exist. Not everyone is Fox or Sun News.
What’s going on here? The answer, surely, is that Wall Street’s Masters of the Universe realize, deep down, how morally indefensible their position is. They’re not John Galt; they’re not even Steve Jobs. They’re people who got rich by peddling complex financial schemes that, far from delivering clear benefits to the American people, helped push us into a crisis whose aftereffects continue to blight the lives of tens of millions of their fellow citizens.
Yet they have paid no price. Their institutions were bailed out by taxpayers, with few strings attached.
They broke it, we fixed it, and now they are doing their darnest to break it again – in the name of their own narrow greed (while patronizing us that we simply couldn’t understand the complexities of macroeconomics). But if there’s a silver lining it seems a light bulb seems to have gone on in the collective consciousness of the American public: The growing realization that they have been governed for the greater benefit of the wealthiest few and that “a rising tide floats all boats” line they’ve been sold for 30+ years is snake oil. And thus #OccupyWallStreet and We Are The 99% was born.
And now it’s coming to Vancouver.
But I’m not sure it’s going to have the same resonance it has down south.
We didn’t bail out the banks here. Well, we did…but stealthily. Unemployment is…well, not exceptionally high by Canadian standards. We’re not as unequal in the distribution of national wealth as other countries – though in Harper’s Canada we are catching up fast.
The beauty of the American movement is that is seems to be broadly based. It’s not just the “usual suspects” who come out to protests. Will it happen here? I have my doubts. I’ve been following the discussions, if they can be called that, between the organizers of #occupyvancouver and…well…the purer than you usual suspects. The following captures the essence of that discussion:
It’s ashame. This…
…is a lot more emotionally and intellectually compelling to the public at large than this…
So why not bend your standards a bit to attract a broader audience? Ack…who knows who’s going to show up and what’s going to happen. And perhaps I’m feeling a bit cynical at the moment, but what’s supposed to happen? What’s supposed to change and what will make Stephen Harper, Christie Clark, Gregor Robertson and Howe Street agree to it? #occupyvancouver could be 110% successful in getting out boots on the ground…but so what? What price do the aforementioned pay? As Ian Welsh depressingly puts it:
[M]odern elites are trained to think in terms of cost-benefit analyses. If the cost to them of not giving in is less than the cost of not giving in, they won’t give in.
Occupying the grounds of the Arts Gallery costs them nothing. Engaging in Black Bloc style violence turns off the general public and provides an excuse to unleash the police…and costs them nothing (you’re doing them a favour in fact).
Only nonviolent, prolonged civil disobedience would make a dent in that cost-benefit analyses. But we’re a long way, I think, from Tahrir Square.
I think we get trapped into a false paradigm of “right/left”, “Democrat/Republican”, “Christian/Atheist” all the time. And I think it’s deliberate, propagated by the people who own the media and broadcast it.
The real paradigm: rich/poor.
And it’s always been the paradigm. In all cultures, in all countries, throughout history.
Jan Pen, a Dutch economist who died last year, came up with a striking way to picture inequality. Imagine people’s height being proportional to their income, so that someone with an average income is of average height. Now imagine that the entire adult population of America is walking past you in a single hour, in ascending order of income.
The first passers-by, the owners of loss-making businesses, are invisible: their heads are below ground. Then come the jobless and the working poor, who are midgets. After half an hour the strollers are still only waist-high, since America’s median income is only half the mean. It takes nearly 45 minutes before normal-sized people appear. But then, in the final minutes, giants thunder by. With six minutes to go they are 12 feet tall. When the 400 highest earners walk by, right at the end, each is more than two miles tall.
Via The Economist
Usually I simply bookmark these on del.ici.ous…but there’s been a grand convergence on the internet today on the subject of income inequality, so it seems like a more fleshed out post is in order. Before we start with what’s Good, let’s skip the Bad and look at the Ugly – which would be Mark Milkie’s op-ed in today’s Sun. I wasn’t able to find out much about who Mark Milkie is and thus why he warrants an op-ed in a major national daily, but he works for or is a contributor to Troy Media.
…it’s shite. It’s obstensibly a critique of The Trouble With Billionaires by Linda McQuaig and Neil Brooks [Review | Review | Excerpt | Excerpt]. Milkie decries the use of strawmen he alleges, but he does not quote any passage and his characterization flies in the face of the two reviews and the excerpt provided. I haven’t read the book so I can’t comment with absolute certainty, but it definitely looks like Milkie is guilty of what he charges of others given that he chalks it all up to envy.
Both are useful examples of what happens when ideas are detached from the real world and spiced up with the colour green (as in envy).
But there are factual claims he makes that can be taken to the cleaners:
The 1929 crash didn’t create the Depression; post-crash policies did.
But in the 1930s, only a few of FDR’s policies were laudable; most deepened the Great Depression
Annual real GDP growth averaged over 9%. Unemployment fell from 25% to 14%. The second world war aside, the United States has never experienced such sustained, rapid growth.
There was a slump in 1937, when FDR tried to return to orthodoxy. But these are just the facts that contradict the platform Milkie is trying to launch his theory from. Which is we need to “create more opportunity” to deal with poverty. How? Who knows. However, this brings us to better, more interesting things. The first is Richard Wilkinson’s book, The Spirit Level, which posits income “inequality as a major factor in health, life expectancy, and the levels of destructive behaviour in any society.” From the Tyee:
It seems at first a very hard case to prove: That the relative gap between poorest and richest in any country is a major factor in its population’s health and well being. The key word is “relative”: poor Americans and Canadians enjoy standards of living much higher than poor Cubans.
But Cubans actually enjoy lower infant-mortality rates than Americans, and their life expectancies are closely comparable: According to WHO, Cuban life expectancy is 77, and American is 78. (We’re at 79.) This is remarkable, considering how much less Cuba can spend on health care. The difference, says Wilkinson, is that rich Cubans aren’t much richer than poor ones.
The next is from Tyler Cowen in the American Interest – “The Inequality that Matters”. Of note:
The upshot of all this for our purposes is that the “going short on volatility” strategy increases income inequality. In normal years the financial sector is flush with cash and high earnings. In implosion years a lot of the losses are borne by other sectors of society. In other words, financial crisis begets income inequality. Despite being conceptually distinct phenomena, the political economy of income inequality is, in part, the political economy of finance.
Tyler’s story of private gains and socialized losses is surely true as an explanation for how the finance industry stayed highly profitable even while undergoing an epic meltdown. But I’m not sure it adequately explains why the industry became so stratospherically profitable before the meltdown. Because the problem in the pre-meltdown era wasn’t that banks were taking on more and more risk, the problem was increased leverage and mispriced risk. For some reason, as Tyler puts it, “It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw.”
And finally there is “Inequality, Leverage and Crises,” an IMF paper written by Michael Kumhof and Romain Rancière. A taste:
The United States experienced two major economic crises over the past century — the Great Depression starting in 1929 and the Great Recession starting in 2007. Both were preceded by a sharp increase in income and wealth inequality, and by a similarly sharp increase in debt-to-income ratios among lower- and middle-income households. When those debt-to-income ratios started to be perceived as unsustainable, it became a trigger for the crisis.
….The key mechanism is that investors use part of their increased income to purchase additional ﬁnancial assets backed by loans to workers. By doing so, they allow workers to limit their drop in consumption following their loss of income, but the large and highly persistent rise of workers’ debt-to-income ratios generates ﬁnancial fragility which eventually can lead to a ﬁnancial crisis. Prior to the crisis, increased saving at the top and increased borrowing at the bottom results in consumption inequality increasing signiﬁcantly less than income inequality. Saving and borrowing patterns of both groups create an increased need for ﬁnancial services and intermediation. As a consequence the size of the ﬁnancial sector, as measured by the ratio of banks’ liabilities to GDP, increases.
All of the latter are interesting. I’m not entirely sure on Wilkinson, but it hard to deny there seems to be at least a circumstantial correlation b/w income inequality and health and mental health.
From a study published by the hardened communists of the International Monetary Fund [pdf]:
This nexus was prominent prior to both the Great Depression and the recent crisis. In our model it arises as a result of increases in the bargaining power of high income households. The key mechanism, reflected in a rapid growth in the size of the financial sector, is the recycling of part of the additional income gained by high income households back to the rest of the population by way of loans, thereby allowing the latter to sustain consumption levels, at least for a while. But without the prospect of a recovery in the incomes of poor and middle income households over a reasonable time horizon, the inevitable result is that loans keep growing, and therefore so does leverage and the probability of a major crisis that, in the real world, typically also has severe implications for the real economy. More importantly, unless loan defaults in a crisis are extremely large by historical standards, and unless the accompanying real contraction is very small, the effect on leverage and therefore on the probability of a further crisis is quite limited. By contrast, restoration of poor and middle income households’ bargaining power can be very effective, leading to the prospect of a sustained reduction in leverage that should reduce the probability of a further crisis.
Where have you gone, Norma Rae?
Update: It’s more a link of the day, than a quote.
I tend to save a lot of articles about income inequality to my del.icio.us bookmarks. It’s one of those things I think is the root of many other social problems. Poverty, health problems, crime, educational attainment…even political stability. But it’s not a cause unto itself. It’s a symptom of the underlying imbalance of our society. Kevin Drum articulates this nicely today:
What kind of system would have produced Wall Street titans with less income and less power? Answer: a system in which there were competing power centers that prevented the rise of inequality in the first place.
That’s precisely it. In a democratic society, a centre of power needs to be checked by other, equal powers. The American Founding Fathers recognized this, amongst others. (hence the 3 pillars of the American government: Executive, Legislature, and Courts). Who are those other centres of power? Labour unions, public interest groups, the press, and so on. But over the last few decades the power of these groups has been eroded or co-opted until we see today where one group – let’s call it the “corporate interest” – sets the agenda. And that agenda mainly benefits their interest. There’s nothing necessarily sinister about it, it’s human nature to address the issues you think are important and that affect you the most. But it does lead to imbalance, an imbalance that can create a feedback loop that causes things to go south fast.
We today still enjoy the lingering fruits of past prosperity. But I don’t have a lot of confidence for the future unless the imbalance is addressed soon. And to be quite frank, I don’t see it happening.