Archive for July, 2014


Tyler Cowen may just be right about one thing: people’s views of inequality seem to be changing.

“I view opinion as in flux,” Mr. Cowen said. “I find that fewer and fewer people, especially outside of academia, accept the skill-biased technical change story and more and more look to politics, privilege, rent-seeking and the like.”

Even while mainstream economists (like Cowen and Gregory Mankiw) are sticking with their story of just deserts—such that those at the very top continue to benefit from rewards to better skills, technical change, and globalization—and the only feasible solution is more education, lots of others—including heterodox economists and the general public—are looking elsewhere for both explanations of and solutions to the problem of growing inequality in the United States.

And that’s why the Cowens and Mankiws of the world want to change the topic: to worry about the global distribution of income and/or to argue that little can be done about inequality without undermining economic growth.

But they’re wrong. And people seem to be catching on to what’s happening behind the curtain. . .



According to the Federal Reserve Bank of St. Louis,

The median net worth of the top 10 percent of the income distribution ($1.194 million) divided by the median net worth of the bottom 10 percent ($3,100) yields a wealth inequality ratio of 385, notably higher than the ratio of 21 for income inequality.

Using net worth distribution to define the population groups changes the statistics even more dramatically, as the bottom 20 percent of the distribution has a negative median net worth. The ratio of the median for the top 10 percent ($1.9 million) divided by the median for the bottom 30 percent ($700) yields a ratio of 2,714.


The Wisconsin Supreme Court [ht: sm] upheld Gov. Scott Walker’s signature labor legislation, the 2011 Wisconsin Act 10 (also known as the Wisconsin Budget Repair Bill), today.

The decision was 5-2, with Justice Michael Gableman writing the lead opinion, which found that collective bargaining over a contract with an employer is not a fundamental right for public employees under the constitution. Instead, it’s a benefit that lawmakers can extend or restrict as they see fit.

“No matter the limitations or ‘burdens’ a legislative enactment places on the collective bargaining process, collective bargaining remains a creation of legislative grace and not constitutional obligation. The First Amendment cannot be used as a vehicle to expand the parameters of a benefit that it does not itself protect,” Gableman wrote.

Gableman said that public employees still had the right to form unions to influence their employers, but government officials aren’t obligated to listen to them.

“The plaintiffs remain free to advance any position, on any topic, either individually or in concert, through any channels that are open to the public,” Gableman wrote.

Here is a link [pdf] to the decision, including the majority opinion, a concurring opinion, and the dissenting opinion. According to dissenting judges Ann Walsh Bradley and Shirley S. Abrahamson,

In sum, the majority’s failure to address the actual issues presented in this case allows it to reach results that countenance the needless diminution of multiple constitutional rights. The right to freedom of association is diluted as the majority has opened the door for the State to withhold benefits and punish individuals based on their membership in disfavored groups. Municipalities’ right to self-govern as granted by the Home Rule Amendment now rings hollow as the majority determines that when the State has budgetary concerns, anything dealing with local finances is a statewide matter. And the right to contract is undermined as the majority demonstrates its willingness to creatively interpret a contract in a manner permitting the State to disregard it.


Right now, mainstream economists are both congratulating themselves and bemoaning their fate.

Mainstream economists (such as Justin Wolfers and Paul Krugman) are congratulating themselves for having achieved a virtual consensus on the positive effects of fiscal stimulus. But they’re also complaining about the fact that the rest of the world (such as politicians, central bankers, and others) doesn’t seem to be listening to their expert advice.

Just two quick comments on this approach to consensual economics:

First, of course there’s a consensus among mainstream economics! That’s what their theories and models are supposed to do: produce and reproduce a consensus in terms of the basic analysis of macroeconomic events (although, of course, there can still be disagreements about particular aspects, such as the exact size of the fiscal multiplier and so on). And anyone who doesn’t use those models, and therefore reaches a different set of conclusions, is declared to be outside the mainstream, and therefore not worth reading or being listened to.

Second, how is it possible to declare—in the midst of the Second Great Depression—that mainstream economics has been an unqualified success? To arrive at such a conclusion would mean to overlook, at a minimum, the role that mainstream economics played in creating the conditions for the crash of 2007-08, in failing to include even the possibility of such a crash in their models, and in confining themselves to a package of monetary and fiscal policy measures—and not to even consider the possibility of larger, structural changes—as tens of millions of people lost their jobs, were stripped of their wealth, and were pushed further and further down the economic ladder.

Those engaged in consensual economics are, it seems, too busy congratulating themselves and bemoaning their fate to want to recognize the gorilla in the room.


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Global Inequality Cartoon and073014web-600x451


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Only in America

Posted: 29 July 2014 in Uncategorized
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debt collections

More than a third of U.S. adults have debt in collections and their average debt in collections is $5,178, according to a study published today by the Urban Institute [ht: eo].*

Debt in collections involves a nonmortgage bill—such as a credit card balance, medical or utility bill—that is more than 180 days past due and has been placed in collections.

More than 1 in 20 people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment. In other words, they have debt that has been reported as past due to the credit bureau. Among people with debt past due, the average amount they need to pay to become current on that debt is $2,258.

Compared with debt past due, a broader set of debts can enter collection status (e.g., medical bills, parking tickets, membership fees), and they can remain on a credit report for up to seven years. People with both types of delinquent debt (collections and past due) have higher average collections debt than those with only collections debt—$9,123 versus $4,641, respectively.

Both figures—the percentage of Americans with debt in collections and the percentage with past due debt—illustrate the enormous financial distress experienced today by a large number of poor and working-class Americans, which will likely haunt them and the communities in which they live for many years to come.


*The credit bureau data used in the study describe people with credit files and do not represent the roughly 22 million US adults (9 percent of the population) with no credit file at all. Because adults without a credit file are more likely to be financially disadvantaged, their data underrepresent low-income consumers. Their analyses also exclude debts such as loans from friends or family, or loans outside the financial mainstream, such as payday or pawnshop loans.


One way of dealing with the problem of growing inequality is to establish a maximum wage. That’s what Franklin Delano Roosevelt proposed back in the early 1940s—a 100 percent marginal tax rate on incomes over$25,000 a year (roughly $350,000 in today’s dollars)—in order to “provide for greater equality in contributing to the war effort.”

Infuriated conservatives saw red, literally. The “only logical stopping place for this movement,” fumed Princeton economist Harley Lutz, would be “a completely communistic equalization of incomes.”

Simon Wren-Lewis reports his own recent suggestion for a maximum wage was greeted in much the same manner.

Well, if mainstream economists are going to howl about tinkering with tax rates, why not make them howl about a real change in the system whereby incomes are distributed? Like Filip Spagnoli’s suggestion to get rid of wage-labor entirely.

Spagnoli’s proposal is to combine a universal basic income (“to cover the costs of the necessities of life”) with an outright prohibition on wage-labor (in order to promote more cooperative, democratic forms of economic organization).

Would a UBI not be sufficient to allow people to pursue their goals? Why also prohibit wage labor? A UBI indeed loosens us from the system of wage labor – it provides a financial cushion that removes the risks inherent in abandoning a job and pursuing our “true destiny” – but it doesn’t go far enough. It gives us the freedom to turn down unattractive work but the pursuit of life’s goals often requires cooperation. Only the prohibition on wage labor makes cooperative ventures more common. A UBI by itself only pushes us towards more satisfying jobs and leaves some of the drawbacks of wage labor intact.

Makes sense to me. Guarantee a basic income for everyone and then, on top of that, encourage the formation of new kinds of enterprises, based on the idea that those who work in the enterprises decide how they should be organized (including, of course, how much they should be paid, what should be done with the surplus, and so on).

One of Spagnoli’s concerns is, “If people can’t work for a wage, many of the ‘dirty jobs’ may not get done anymore.” The fact is, we already have Cooperative Home Care Associates in New York City, which is the largest worker-owned cooperative in the country. It’s relatively easy then to imagine a system of such cooperatives, in which democratically organized workers do everything from toilet cleaning, waste disposal, and mining to teaching, healthcare, and software design.

The time is ripe to open up the debate about proposals like establishing a maximum wage, guaranteeing a basic income, and prohibiting any and all forms of wage-labor. The only price of admission is to listen to the howling of mainstream economists.

Chart of the day

Posted: 29 July 2014 in Uncategorized
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This is how labor is being organized in building projects for the 2022 World Cup Finals scheduled for Qatar.

Migrant workers who built luxury offices used by Qatar’s 2022 football World Cup organisers have told the Guardian they have not been paid for more than a year and are now working illegally from cockroach-infested lodgings. . .

By the end of this year, several hundred thousand extra migrant workers from some of the world’s poorest countries are scheduled to have travelled to Qatar to build World Cup facilities and infrastructure. The acceleration in the building programme comes amid international concern over a rising death toll among migrant workers and the use of forced labour.

“We don’t know how much they are spending on the World Cup, but we just need our salary,” said one worker who had lost a year’s pay on the project. “We were working, but not getting the salary. The government, the company: just provide the money.”


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