“To the victors belong the spoils”

In the United States, we’ve mostly eliminated the spoils system in politics (except, of course, here in Chicago, where it continues as if nothing had changed since the Jackson presidency and Tammany Hall). Now, however, we have a spoils system in the economy, and that has people like Robert Samuelson worried.

In all honesty, I sympathize. Just last week, I was forced to spend long hours on the telephone with three different businesses which—in a clear pattern of consciously making “mistakes” they hoped bill payers like me wouldn’t notice—overcharged for their services. Oops, they said, our mistake. Now that you’ve caught us, we’ll refund the excess charges.

Clearly, American businesses these days are grabbing every last dollar they can get away with—whether it be the airlines or banks or utilities. Samuelson’s examples are BP, “patent trolls,” and CEOs, all of whom are engaged in plundering of one sort or another.

But Samuelson’s premise is there’s a sharp difference between wealth creation (which, in his view, fuels economic growth) and a spoils society (which involves battles over redistributing wealth that already exists).

There are two ways to become richer. One is to provide more goods and services; that’s economic growth. The other is to snatch someone else’s wealth or income; that’s the spoils society. In a spoils society, economic success increasingly depends on who wins countless distributional contests — not who creates wealth but who controls it. This can be contentious. Winners celebrate; losers fume.

What Samuelson doesn’t understand is that the process of wealth creation in the United States was, throughout the postwar period, an economy based on spoils, as labor productivity and corporate profits great in tandem. It’s just that real wages also continued to rise during that period. “To the victors belonged much but not all of the spoils,” would be an appropriate slogan for that time.

Then, in the mid-1970s, things changed and we entered a new period of American capitalism. Then it became “to the victors belong almost all of the spoils,” as productivity and profits continued to rise but wages remained stagnant. That growing inequality is what created the conditions for the crash of 2007-08, and which has resumed during the post-2009 recovery.

The U.S. economy, during the entire postwar period, right up to the present, has been based on a combination of producing and redistributing wealth, with pitched battles throughout. The only change is that, beginning in the mid-1970s, the tiny minority at the top, based on their prior successes, became increasingly adept at capturing and redistributing to themselves the surplus produced by everyone else, who were left outside the spoils system.

And that’s where we are today, with new records being set for the share of income going to those at the top (with a rising corporate profit share, stock prices, and the percentage of income going to the top one percent) and everyone else being left behind. That’s what should have people like Samuelson worried: that the members of the one percent have, like Jackson, declared themselves the victors and to them—and only to them—belong the spoils.

Debt ceiling fix

In one sense, Henry Aaron is right: the limit on the debt ceiling is “a law with no discoverable purpose.” He suggests, therefore, that Obama ignore it.

But there are at least two other ways to avoid the problem. One is for the Treasury to avoid the federal debt limit by handing the Federal Reserve a single $1 trillion platinum coin. But that’s too easy (even though Jon Stewart didn’t get it). The other is to raise taxes on large corporations and wealthy individuals. Raise them by a lot. Set a marginal tax rate of 100 percent.

That’ll fix the problem almost immediately, since those threatened with paying higher taxes will quickly run to their stooges in Congress and demand they raise the debt ceiling. Anything to avoid paying higher taxes, in order to keep the lion’s share of the surplus in their pockets.

Cartoon of the day

Special mention

Destroying the university—in 5 easy steps

The university, as I have discussed many times on this blog, is being dismantled.

The university I’m referring to is the place where critical thinking takes place, where critical ideas are produced and disseminated. And it’s that university generations of working-class students have struggled to enter, to become part of that project of critical inquiry.

But it’s becoming harder and harder for those students to acquire a decent university education, as the barriers to entry go up and the quality of the education they’re receiving is going down. We are therefore facing the destruction of the university.

Debra Leigh Scott [ht: sf] summarizes how the university is being destroyed in five basic steps:

Step I: Defund public higher education.

Step II: Deprofessionalize and impoverish the professors (and continue to create a surplus of underemployed and unemployed Ph.D.s).

Step III: Move in a managerial/administrative class that takes over governance of the university.

Step IV: Move in corporate culture and corporate money.

Step V: Destroy the students.

And there you have it: if this process if allowed to continue, the university as we have known it will be destroyed. Truth be told, the governing elite can’t allow themselves to actually eliminate the institutions of higher education entirely, because they still need to bring students and faculty together (under the command and control of corporate managers, of course) so that job-training and skills can be manufactured and sold to the highest bidder. Those of us who don’t comply, who persist with the idea of what a real university can and should be, will henceforth be forced to stand outside our lecture halls asking students to pay for the bits of insight and knowledge we can offer—$50 for a good idea, $100 for a great one or, alternatively, an article of precious clothing, a barely used knapsack, maybe a freshly baked pie.

As for the rest, it will be a university in name only—unless we do undo the five easy steps outlined above.

Update

And, of course, there are alternatives: like the University of Mondragón [ht: fw].

Economic history: did wage-slavery make economic sense?

It’s Sunday and therefore time to let our minds wander a bit, away from the daily lunacy of proclaiming a recovery and engineering a government shutdown in the midst of the Second Great Depression. . .

So, my question for the day: can we imagine a time in the future when we debate the historical question of the profitability of wage-slavery?

To paraphrase from the recent column by C.W. and A.J.K.D.,

Intuitively, a business that uses wage-slaves should be profitable. You pay your workers a bare minimum, and reap the benefits of their labor. And some economic historians try to show just how lucrative it was.

We might then consider, in the future, how individual businesses benefited from wage-slavery—employing wage-slaves and buying the goods and services produced by wage-slaves, not to mention financing the enterprises that are based on wage-slavery—but overall economic development was hindered and distorted by the use of wage-slavery.

It would be a debate not dissimilar to the one we’ve been having for two hundred years about the older form of slavery, which has demonstrated why the institution of slavery lasted for as long as it did, until finally its injustice and irrationality were recognized and the institution itself was eliminated.

Imagine a time in the future we might be able to write (again paraphrasing C.W. and A.J.K.D.),

Of course any account of the economic effect of wage-slavery should note the effect of treating human beings as capital equipment. The direct impact on the utility of the wage-slaves themselves of this condition represented a terrible economic cost. And there was also an opportunity cost to the broader economy, which lost out on the potential human capital and entrepreneurial contributions wage-slaves might have made as freely associated workers. Abolition of involuntary wage-servitude to say nothing of wage-slavery, was clearly a moral imperative. We can also feel pretty safe concluding that, whatever the benefit of the system to wage-slave-employers, its abolition made as much economic sense as anything can.

Cartoon of the day

Special mention

Chart of the day

source

Incomes for those at the top continue to rise (based on increases in corporate profits, dividends, CEO salaries, property income, and capital gains) while, for everyone else, the trend (represented here in terms of real median household income) continues to be far below its pre-recession level.

So, why all the talk of recovery, when in reality we’ve only seen a recovery for a tiny minority at the top?

As Richard Wolff explains,

Hyping a recovery helps politicians to boost their popularity (or at least, slow its decline). It also serves to give masses of people with growing economic difficulties the impression that “other people” are experiencing a recovery. So they blame themselves (their age, skill set, education and so on) for missing out. The recovery hype thereby functions as a massive “blame-the-victim” program, in which a dysfunctional capitalism escapes criticism, while its victims instead turn criticism inward upon themselves.

Hyping recovery pleases those seeking reassurance about the state of capitalism. They want to hear that it is – or will shortly be – the secure, near-perfect economic system they always thought and said it was. They want to see the system’s flaws, imperfections, and ongoing crisis – stressed by capitalism’s critics – as merely minor and passing irritations. Calming references to recovery – used often and said as authoritatively as possible – nicely suggest that capitalism is either healing itself or being healed by a benevolent government.

Academic economists, with careers built celebrating capitalism’s efficiency, growth, and optimality for everyone, need urgently to hype recovery just as they have long hyped capitalism. They want to escape the ridicule of agitated students who keep taking on more crushing debt to pay for school, while their job and income prospects deteriorate.

It’s time, however, to eliminate these weapons of mass distraction—and to face with sober senses our real conditions of life, and our relations with our kind.

Cartoon of the day

Special mention

Chart of the day

Most Americans (53 percent) think the government is doing more to help the rich at the expense of the poor and middle class, according to a new HuffPost/YouGov poll. And only two percent think it should do more to help the rich.

Given the policies that have been adopted (and, even when not adopted, proposed) in Washington, D.C. during the Second Great Depression, how could they think otherwise?

Note: if I had the time, I’d make the table into an actual chart.

Know this!

Richard Florida continues to peddle his story of knowledge workers, the creative class, and urban clustering (about which I have raised questions before, such as here and here).

But economic inequalities have become so glaring and obscene, even Florida has finally come to admit their existence:

The main threats to America’s growth model don’t come from other countries, but from domestic contradictions. The more talented people cluster, the greater the economic returns they produce. But as these clusters of highly educated people form and grow, they tend to push out the middle class, resulting in a ruthless sorting of people and places. As great as its potential may be, this new economic landscape is also notable for its widening fissures.

The cultural, political, and economic gulfs that separate advantaged and disadvantaged people and places go well beyond the wage gap. Knowledge workers benefit from living in neighborhoods with better schools, better amenities, and lower crime rates, while less advantaged groups are sometimes stuck in place, with limited prospects for climbing even one rung up the economic ladder, and insufficient resources to move out of stagnant areas.

And how creative can Florida get, now that he knows about all those poor people clustered into into depressed areas of cities? The best he can do is suggest that poor people get up and move to his “knowledge centers,” where their chances for moving up the ladder will be improved.

Here’s a not particularly creative alternative idea: end poverty!