According to Bruce Bartlett, “Generally, the higher up you are in the economic pecking order the more flexibility you have to arrange your affairs to make the form of your income fit the tax rules.”
And, as we’ve seen, it works, especially when the rules themselves are changed to favor those who receive distributions of the surplus:
Capital has lots of different options when things don’t go its way. One of them is to go on strike, by decreasing investment expenditures. The result is a decline in economic activity and an increase in unemployment, which—via lower wages and government stimulus programs—(perhaps) restore the conditions of profitability.
(The chart is from the Cato’s Chris Edwards, who blames the decline of private investment on fears of “higher taxes, inflation, health care mandates, increased labor regulation, and other profit-killers coming down the road from Washington.” He seems not to understand that (a) capital’s strike began long before Obama was elected and (b) much of capital wants health-care reform precisely to restore the conditions of profitability.)
What promises to be an intellectually stimulating and politically invigorating event—a variety of new Marxian perspectives on the current crises of capitalism—at the University of Massachusetts Amherst, next Thursday, 5 November, at 8 pm. . .
This is serious business. In this country, we used to manufacture things — skyscrapers, the V-8 engine. Now we’re No. 1 one for toilet paper and bacon. We do have the best toilet paper in the world. And bacon — you go to France and they think they know what they’re doing. . .It’s a good product, but it’s not bacon. We’ve got this down. Chicago needs to claim this. We’re the Hog Butcher to the World.
John Manion, chef at Goose Island Brewpub
Angry Bear’s Spencer notes that, during the so-called Great Moderation, labor’s share of the economic pie (i.e., nonfarm business output) fell ten percentage points.
If you really want to raise a stink you could look at this as a great example of the Marxist immiseration of labor that Marx believed was one of the internal contradictions of capitalism that would eventually lead to its self destruction.
OK, let’s raise a stink: the rate of exploitation rose.
Interfluidity’s Steve Randy Waldman, in turn, notes the relationship between the shift in the distribution of income and the asset bubble:
Follow the money. Whether an economy generates asset price inflation or consumer price inflation depends on the details of to whom cash flows. In particular, cash flows to the relatively wealthy lead to asset price inflation, while cash-flows to the relatively poor lead to consumer price inflation.
Why? In Keynesian terms, poorer people have a higher marginal propensity to consume. The relatively poor include people who are cash-flow constrained — that is they cannot purchase what they wish to purchase for lack of green, so their marginal dollar gets immediately applied to the shopping list.
And the role of the monetary authority?
In “good times”, central bankers actively suppress the median wage (while applauding increases in the mean wages driven by the upper tail). During the reset phase, policymakers bail out creditors. There is nothing “natural” or “efficient” about these choices.
Slowly but surely, we can begin to connect the dots: a falling wage share (indicating a rising rate of exploitation), increasing wage inequality (indicating increased distributions of the surplus to the highest tier of “wage-earners) led to asset price inflation (as wage-earners turned to credit to make durable purchases and recipients of the surplus bid on financial assets), while the state actively supported all three activities.
I’ve been meaning to write about a superb study of media coverage of the current crises, “Covering the Great Recession,” conducted by the Pew Research Center’s Project for Excellence in Journalism.
Among the major findings:
Three storylines have dominated: efforts to help revive the banking sector, the battle over the stimulus package and the struggles of the U.S. auto industry. Together they accounted for nearly 40% of the economic coverage from February 1 through August 31. Other topics related to the crisis have been covered much less. As an example, all the reporting of retail sales, food prices, the impact of the crisis on Social Security and Medicare, its effect on education and the implications for health care combined accounted for just over 2% of all the economic coverage.
Actions by government officials and business leaders drove much of the coverage. The White House and federal agencies alone initiated nearly a third (32%) of economic stories studied through July 3. Business triggered another 21%. About a quarter of the stories (23%) was initiated by the press itself and did not rely on an external news trigger. Ordinary citizens and union workers combined to act as the catalyst for only 2% of the stories about the economy.
In other words, the media have focused on the effects of the crises on big business and on how government officials and business leaders have responded to the crises. Coverage of all the other important issues—the broader impact of the economic downturn on the lives of ordinary Americans, labor issues, worker layoffs, the ways (both good and bad) people have responded to the crises—has been negligible.
In my mind, the study emphasizes two key issues: the importance of investigative journalism and the silencing of subaltern voices.
On the first,
when the coverage was heavily institutional and based on government action, the stories were coming at the press. To cover the lives of ordinary people, journalists had to go out and find the stories for themselves.
One example was a March 12 story in the Kansas City Star that illustrated some unorthodox ways in which the recession was affecting crime. The story told of a man who stole a bank’s overnight deposit box in an economically hard-hit county in Southwest Missouri only to return the following night and give back that part of the loot that belonged to regular citizens. The local sheriff was quoted saying the robber apparently could not bring himself to keep the “little people’s money.”
On the second,
In analyzing sources in stories, however, the fundamental pattern is the same. Those in government, and especially Obama administration staffers, dominated the conversation. Representatives of business and industry came next, followed by academics and independent observers. But the voices of ordinary citizens and people in the workplace trailed behind, appearing in only about one in every five stories.
Clearly, the existing media, especially as the ranks of investigative journalists are being depleted, cannot be counted on to provide a “fair and balanced” perspective on the current crises. Nor do electronic publications and the blogosphere, in which subaltern voices and perspectives are rarely in evidence, represent a solution to the problem.
It seems we have an answer to the question I posed yesterday, about whether or not Marxian economists will be invited to the table in Soros’s Initiative for New Economic Thinking.*
First, there’s Anatole Kaletsky’s essay [ht: sw] offering “Three Cheers for the Death of Old Economics”:
A good test of whether this venture proves successful will be to ask a simple question: Was Adam Smith an economist? Were Keynes or Hayek? By the standards of what is taught as economics today, the answer is “no”. They may have explained some of the deepest mysteries of human life: why the pursuit of individual self-interest increases the wealth of nations; why market economies suffer prolonged slumps; why central planning never works.
Conspicuous by his absence is Marx. And, of course, there’s the assertion—without evidence or argument—that “central planning never works.”
Then, there’s Soro’s ridiculing of “university Marxists“:
CF Do you think university faculties will accept the sort of outside influence?
GS There will be great resistance and people in the universities are rather despondent because they realise that papers that don’t conform to the prevailing dogma are not accepted by the periodicals which are used to give tenure. So there is a self-perpetuating quality about tenure and the people who are involved in it are pretty despondent about breaking in. I am much more optimistic because I think that this financial crisis has definitely proven that that is unrealistic, that they dogma has lost touch with reality. And I think reality will push its way in, in the form of the students who will not want to study a dogma whose time has passed. It’s like a little bit like Marxist dogma. The collapse of the Soviet Union did not bring an end to Marxism. There are still Marxists at universities, maybe more in Europe than in America, and eventually they’ll die out, but until then, they will be there. But they may not have any students listening to them.
It’s pretty clear—and, some will say, not surprising—that Marxian ideas will not be among the hundred theories allowed to bloom in Soro’s well-funded corner of the world. One way of putting this is, within the world of Stiglitz and Soros, questions can be raised about crises within capitalism but not about crises of capitalism.
* Nick Kraff has also questioned the breadth of Soros’s initiative.
Anthony Stevens-Arroyo has nominated Michael Moore Catholic of the Year for his latest film, “Capitalism: A Love Story.”
The reasons?
First, Moore places a favorable light on his lived Catholic experience and the trust he places in Catholic priests. . .
Second, Moore puts a human face on the suffering caused by economic hardship. . .
Third, the picture’s upbeat message is based on several real successes, experienced by Moore. . .
Finally, Moore’s alternative is not some pie-in-the-sky radicalism.
Stevens-Arroyo also offers a warning, a historical lesson, for those who inspired by the utopian moments of Catholicism:
The Catholic doctrines of Social Justice is a difficult one to practice, and in practice it often leads to error. . .When Catholic thinkers decided that capitalism and socialism were both wrong they looked for a third way and many found fascism, which was a heavily Catholic phenomenon. Beware of Social Justice and Utopianism.
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