Posts Tagged ‘consumption’

Chart of the day

Posted: 3 February 2014 in Uncategorized
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As the New York Times reports, based on a recent paper by Barry Cynamon and Steven Fazzari [pdf],

In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust, according to Mr. Fazzari and Mr. Cynamon. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.

More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to the study, which was sponsored by the Institute for New Economic Thinking, a research group in New York.

The effects of this phenomenon are now rippling through one sector after another in the American economy, from retailers and restaurants to hotels, casinos and even appliance makers.

For example, luxury gambling properties like Wynn and the Venetian in Las Vegas are booming, drawing in more high rollers than regional casinos in Atlantic City, upstate New York and Connecticut, which attract a less affluent clientele who are not betting as much, said Steven Kent, an analyst at Goldman Sachs.

Among hotels, revenue per room in the high-end category, which includes brands like the Four Seasons and St. Regis, grew 7.5 percent in 2013, compared with a 4.1 percent gain for midscale properties like Best Western, according to Smith Travel Research.


Yachts Arise

It is clear, as Allison Schrager [ht: ja] observes, that inequality has become the defining issue of our time.

Powerful leaders, from President Obama to Pope Francis, have cited it as evidence that the unfettered capitalism that has enriched the wealthy hasn’t been shared. Of course, there’s a difference between the gains in income being shared evenly, shared a little, or making everyone else poorer. In many ways the average American is much better off than he used to be; in other ways he’s worse off.  But even if we focus on what’s gotten better, we may still need to worry about the future.

The question is, what exactly do we mean when we refer to people being better or worse off? The official statistics are pretty clear: inequality (in terms of both income and wealth), poverty, and economic insecurity have grown while mobility has declined and average wages and per capita incomes remain stagnant. They’re all indicators that there’s an increasing gap between a tiny minority of Americans at the top and everyone else.

Not surprisingly, the growing gap has brought forth a veritable industry of mainstream economists to argue that things aren’t as bad as we have been led to believe. With a great deal of tinkering with definitions and categories of income, price series, data sets, time periods, and much else, they have attempted to show that there’s less poverty, more growth of income at all levels, and less inequality than the existing indicators demonstrate.*

That’s fine. I’m quite willing to admit that the average poor and working person has somewhat more (and even better) stuff to consume than they did, say, twenty years ago. The rising tide (of national economic growth) has, in fact, lifted all boats (including those at the middle and bottom). It is not the case, then, that, as the rich have gotten richer, the poor have gotten poorer.

Not in an absolute sense. And not in recent decades—although Schrager’s fear is that such a situation may, in fact, prevail in the future.

But it’s not scraps from the table we’re actually worried about when we talk about the menace of growing inequality. It seems to me there are two other issues that are more important. The first is the growing gap between the potential created by growing national wealth and the actual circumstances of the majority of Americans. In other words, the situation of most Americans would be much better than it currently is—in terms of how they live, what they consume, what services they have access to, and so on—if only they had a larger share of the wealth produced in the country. And here I’m not referring just to individual circumstances (however measured, whether in terms of incomes or actual consumption) but also to collective consumption (in the form of schools, parks, neighborhoods, and so on). This economy, given its wealth, could provide a decent standard of living to everyone—and it doesn’t.

That’s one important dimension of inequality. The other is the growing dependence, as both a condition and consequence of inequality, of the vast majority of Americans on the decisions of a tiny group at the top. Even when the average standard of living of many people has gone up, the fact that the lion’s share of what they produce is captured by a small number of employers, executives, and owners means that the decisions they make determine the fate of everyone else. And the growing share of income and wealth in their hands allows them to continue to exercise that kind of control, and to make all of the rest of us dependent on what they decide to do. The choices they make are what determine the pace and pattern of economic growth—in the form of economic booms and busts, where and what kinds of jobs are created (or not), how high (or low) wages and salaries will be, what kinds of benefits will be included (or excluded) from pay packages, and so on—and everyone else is forced to go along and do what they can to survive.

To my mind, those are the two crucial dimensions of inequality, which simply can’t measured in the way Schrager suggests. But ultimately they are the reasons why she and others should be very worried about the future—a future in which, as the rich get richer, the poor (and everyone else) are getting relatively poorer. In the end, that’s the only measure of inequality that matters.


*This includes the recent work I’ve discussed before (e.g., here and here) as well as the older work, by Christian Broda, Ephraim Leibtag, and David E. Weinstein [pdf], cited by Schrager.


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Solidarity Economy picture_wksp_front

I’m all in favor of sharing—and even, in places, a sharing economy.*

But I suspect the current app-assisted sharing economy is just another one of those ideas that the twenty-somethings who work in Silicon Valley have dreamed up and celebrated because it satisfies their own consumption needs. It’s an idea that relies on individual ownership and rational calculation of returns to ownership. Besides, as James Surowiecki concludes,

It also means no benefits, no steady paycheck, and the need to always be hustling; in that sense, it fits all too well with the free-agent nation we’re increasingly becoming. Sharing, it turns out, is often a hell of a lot of work.

Much more interesting is the solidarity economy, where people come together as collectivities to create new, cooperative economic institutions, where they decide as a group how and why to produce, exchange, consume, and distribute—since each moment affects all the others. Which highlights the problem of the sharing economy: it changes consumption but leaves everything just as it was before.

And it’s a helluva lot of individual work.

*A friend and I have long been discussing the irrationality of everyone on the Mountain owning their own tractors, instead of everyone sharing the use of one jointly owned tractor.


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Anyone say Veblen?

Posted: 1 December 2012 in Uncategorized
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Gifts for the 1 percent in a still-predatory economy. . .

[ht: ke]

Barbara Kruger, “Belief+Doubt”

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