Posts Tagged ‘poor’

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Only in America

Posted: 8 February 2014 in Uncategorized
Tags: , , , ,

postal-banks

The United States has a postal system that is supposed to be self-financing (even after pre-paying postal workers’ pensions) and a poor population that has been ignored by the official banking industry (and therefore is prey to the growing cash-checking and payday-loan industry).

So, the U.S. Postal Service’s Office of the Inspector General [pdf] has come up with the idea of the USPS stepping into the breach by providing financial services to poor people, thus killing two birds with one stone: improving the postal service’s finances on the basis of financial fees paid by poor people who increasingly live in bank deserts.

Elizabeth Warren supports the idea (because she sees it as providing “access to affordable and fair financial services”) and, not surprisingly, the banking industry condemns it (creeping socialism and all that).

Adam Levitin, appropriately, suggests caution:

It is hard to make low-income consumers—like many of the unbanked and underbanked—into profitable financial services customers. That is one reason why so many are unbanked.

This points to a real tension in any sort of postal banking proposal: to the extent that a postal banking system is designed to provide low-cost services to consumers, it is potentially at odds with the USPS’s need to find new revenue sources. Put another way, is the mission of a postal bank profit or financial inclusion?

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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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